Bilateral trade imbalances (e.g., US-China trade deficit) are economically irrelevant; what matters is the systemic level—the global US trade deficit must accommodate the global Chinese trade surplus, and as long as the US deficit grows, it can absorb the growing Chinese surplus regardless of bilateral composition; transshipment (China → Vietnam → US) and income effects explain why bilateral tariffs don't reduce systemic trade deficits.

causalpending

Speaker

Michael Pettis

Evidence Quote

what really matters is trade imbalances at the system level. Bilateral trade imbalances are irrelevant

Source

Michael Pettis: China’s Consumption Crisis Is The World’s CrisisThe Monetary Matters Network
Created: 8/11/2026, 7:43:21 AM

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