By Christopher Combs
Chief Investment Officer, Silicon Valley Capital Partners
August 27, 2026
For decades, the United States has imported more than it exports. That trade deficit is often treated as an abstract economic statistic. It is not. It has a financial consequence.
When America buys more from foreign countries than they buy from us, the difference must be financed. The dollars sent overseas ultimately return through foreign purchases of U.S. stocks, bonds, Treasury securities, businesses, real estate and other assets.
The United States can sustain this arrangement more easily than almost any other country because the dollar is the world’s dominant reserve currency and American capital markets remain the world’s deepest.
But that privilege does not eliminate the arithmetic.
When imports continually exceed exports, America receives more goods today while foreigners accumulate more claims on American wealth and future income.
The consequences can be understood in three points.
1. The Goods Are Consumed. The Financial Claims Remain.
Suppose America imports $5 trillion of goods and services and exports $4 trillion.
The $1 trillion difference must be financed.
The United States receives $1 trillion more in foreign production than it sells abroad. Foreign holders of those dollars can then purchase American Treasury securities, corporate bonds, stocks, businesses and real estate.
The exchange is straightforward:
America receives the goods. Foreign investors receive financial claims.
That distinction becomes increasingly important over time.
An imported automobile, television or appliance eventually depreciates or is consumed. A Treasury bond held overseas continues paying interest. Foreign ownership of an American company can generate dividends and capital gains for decades. Foreign-owned real estate can generate rents and appreciation.
One year’s imbalance is manageable. Decades of imbalances accumulate.
By the end of 2025, foreign-owned assets in the United States exceeded U.S.-owned assets abroad by approximately $27.6 trillion.
That does not mean foreign investment is bad. Quite the opposite: America benefits enormously from being the world’s premier destination for capital.
But the balance sheet still matters.
Persistent trade deficits can exchange present consumption for long-term foreign claims on American assets and income
2. Importing Production Can Eventually Mean Importing Prosperity From Somewhere Else
Trade benefits America. Imports lower prices, increase consumer choice and provide American businesses with machinery, components and raw materials.
But there is an important difference between importing because another country produces something more efficiently and becoming structurally dependent on foreign production.
America’s goods trade deficit exceeded $1.2 trillion in 2025. Strong U.S. services exports offset part of that deficit, but the overall goods-and-services deficit still approached $900 billion.
When production occurs overseas, much of the economic ecosystem surrounding that production can occur there as well.
Factories create capital investment. They employ engineers and skilled workers. They support suppliers, transportation companies, equipment manufacturers and technology providers. They create expertise that can lead to the next generation of products.
Over decades, repeatedly purchasing foreign production rather than expanding domestic production can therefore have consequences beyond the trade deficit itself.
America does not need to make everything. But it needs to remain capable of making enough of what the world wants to buy.
A wealthy consumer nation is powerful. A wealthy consumer nation that is also a dominant producer is considerably more powerful.
3. Trade Deficits Can Turn Into Financial Dependence
The greatest long-term concern is not the annual trade deficit. It is the accumulation of financial claims that can accompany persistent deficits.
The cycle is simple:
America imports more than it exports. Dollars move overseas. Those dollars return through purchases of American assets. America then pays interest, dividends, rents and investment returns to foreign owners.
The situation becomes more consequential when combined with persistent federal budget deficits.
Washington also spends more than it collects. It finances the difference by issuing debt.
Trade deficits and budget deficits are not the same, and one does not automatically cause the other. But both can increase America’s reliance on capital markets and national borrowing.
There is nothing inherently wrong with foreigners investing in America. Foreign capital that builds a semiconductor plant, data center or manufacturing facility can increase American productive capacity.
The problem is using foreign capital to support persistent consumption and government borrowing without generating comparable increases in productive capacity.
That is the distinction between borrowing to become more productive and borrowing to maintain consumption.
The Bottom Line
The argument against persistent trade deficits is not an argument against trade.
It is an argument about balance sheets, production and ownership.
Imports have to be paid for. If exports do not pay for them, capital flows finance the difference.
Over time, that can mean more American debt and assets are owned abroad, more investment income flows overseas and, where domestic industries have been displaced, less productive capacity remains at home.
America’s reserve currency gives the country an extraordinary ability to finance these imbalances. But the ability to borrow cheaply should not be confused with the absence of a cost.
The long-term objective should therefore be straightforward:
Produce more. Export more. Save more. Borrow less.
America should remain open to trade and foreign investment. But trade should be reciprocal, foreign markets should be open to American companies, and U.S. economic policy should make America one of the most attractive places in the world to build, manufacture and invest.