“Consumption is the sole end and purpose of all production.” Thus taught Adam Smith. It is hard to see what else production is for, now or in future. Consumption must be the goal of international trade, too. But what happens if significant players do not seem to believe this? Then the global system malfunctions.

Today, the structural excess savings of a number of economies, notably China, Germany and Japan, are largely offset (and so activated) by the excess spending of the world’s most creditworthy country, the US, (and, to a lesser extent, the UK). The figures are startling. Just these big three surplus economies ran aggregate current account surpluses of $884bn in 2024. The surpluses of the top 10 countries amounted to $1.568tn. But surpluses are only made possible by deficits. Thus the US ran a current account deficit of $1.134tn, to which the UK added $123bn. (See charts.) Donald Trump’s presidency is, in part, a symptom of this reality.

The biggest problem with Trump’s international economics is that he focuses on a symptom, the US trade deficit, and seeks to eliminate it through erratic and irrational tariffs. This may have been made a little less damaging by this week’s “deal” with China and resulting decline (perhaps temporary) in bilateral tariffs. But without macroeconomic rebalancing, the US trade deficits will remain. A necessary condition for this is to slash US fiscal deficits, along with policy changes elsewhere, notably China, aimed at lowering excess savings.