Tariffs are a misadapted solution to deal with the labor-economic issues of the United States. Current accounts (Ex-IM) deficits with foreign countries should be regarded 500B$ Capital inflow in the U.S economy. The U.S is a special case in economics because the U.S dollar is the money of the world and evidences suggest that current accounts deficits are Assets for the Federal Reserve, not liabilities.
What is real the origin of the current account deficit ?
-The United States runs current account deficit with other countries because the dollar is the reserve currency of the world.
Let us say for example that India and France trade with each other and as a result India owes France $100M. Notice the fact that India owes France money in dollars and not in rupees! In fact the French would not accept payment in rupees. They would only accept payment in dollars. This is because once they receive the payments. They have to use the proceeds to buy oil and such essential commodities from the foreign markets. Since these commodities are traded in dollars, all balance of payment differences are settled only in dollars.
Now, if the United States wants to settle its current account deficits, it faces many advantages as compared to other countries:
Firstly, United States can print up dollars and make the payments while foreign countries cannot simply create money to settle their current account deficits.
This is a privilege that accrues to United States because of the dollars status as the reserve currency.
It’s what President Charles De Gaulle has called the “exorbitant privilege”.
In 1974, The U.S was perceived as living way beyond its means with the Vietnam War and a growing military industrial complex leading to large budget deficits.
On the previous year, OPEC tripled the dollar price of oil in retaliation to Washington’s support of Israel, preventing its total annihilation during the Yom Kippur War.
President Charles de Gaulle concerned about the U.S was facing a balance of payments crisis sent its navy to exchange their dollar reserves and repatriate their gold bullion bars from the Federal Reserve Bank of New York.
This move has precipitated the end of the gold-dollar convertibility by President Richard Nixon in 1974 and since then we have switched our economies from money whose value as underpinned by some physical good to a money whose value is backed by the government that issued it. This fiat currency has allowed government to monetize large deficits since the 70’s and to a large extent is the origin of the large current account deficits.
Today, the U.S runs current account deficits but does not face a balance of payments crisis, because it purchases imports in its own currency. The money that is paid out to settle the debts, more or less ends up with the Federal Reserve again !
The current account deficit is seen by the Economists as a capital inflow.
Conceptually by using national income accounting we can demonstrate this equivalence:
[eq.1] is the GNP by expenditures approach:
Where (GNP) is the gross national product
C= private consumption
I= private investment
G=government goods and services
Tr= Transfers from abroad
[eq.2] represents the GNP by the Income approach.
It is based on the idea that any income received by individuals has four possible uses: it can be consumed (C), saved (S) paid in taxes (T), or transferred abroad(Tr).
By Equating  with  cancelling out C, we can rearrange the GNP as
X – M – Tr = the current account.
(S-I)= The surplus of saving over investment.
(T-G)= Government budget surplus
What does it say ?- The current account (The right side of [eq. 3]) for the United States is negative by more than $500B each year.
A final equation must clarify the link between the current account deficit and this capital inflow from foreigners.
Each dollar of savings (S) can be used to buy domestic capital (I), domestic government debt (G) or Foreign Assets (FA).
Recalling that the net issuance of debt equals the government deficit (G-T):
Replacing  into  we obtain
This last equation should be interpreted as this: the current account deficit of the United States accordingly must be balanced by FA, an annual capital inflow of $500B each year into the 17 Trillion dollar economy of the United States.
For example: The Swiss National Bank’s (SNB) manages 700 billion CHF (which mainly comprised highly liquid bonds issued by mostly AA or higher). Around 35% of the bank portfolio is in U.S dollar. The SNB U.S equity assets alone amounted to $80B.
It implies that S > I. e.g the private saving is more than adequate to finance investment + the government budget deficit (G-T) in Switzerland. The SNB monetary policy is ensuring price stability (mainly of the swiss franc) by recycling the surplus (capital inflows and government surplus) in its country becomes a net lender into the United States.
Today two things haven’t changed.
1. The U.S government is living beyond its means (and the left side of [eq. 3]. The United States runs large government deficit and annually it must be balanced by the current account deficit (capital inflow).
2. If Money is a commodity like or and water, the U.S Dollar is the best brand there is: you can make it more by lending to those who don’t have it.
This latter aspect creates a financial demand for dollars and as a result the United States government can borrow money much cheaper from the world than it otherwise could.
Rather than a debt-like liability, the current account deficit of the United States is analogous to common equity for the Federal reserve.
The U.S government is advised to reduce its spending if wants to settle current account deficit with foreign countries rather than putting tariffs that are redistributed only to a minority of people, inflating prices and decreasing the private consumption of millions of Americans.
Tariffs are counterproductive to deal with the labor-economic issues of the United States. Current accounts (Ex-IM) deficits with foreign countries should be regarded as a 500B$ yearly capital inflow into the U.S economy.
Advising the producer, processor and end-user in North America. Commodity trading and finance
Trained as an Economist, Simon Jacques is a long-term strategist of agricultural and energy merchant assets with complex risk fundamentals applied to a macro view on price and non-linear dynamics.