Eliminating US trade deficit requires significant dollar depreciation — Reuters

Reuters says a significant weakening of the US currency is necessary to narrow or completely eliminate the United States’ trade deficit, which is the main goal of Donald Trump's economic agenda.

A shift away from the strong dollar policy and large-scale import tariffs of the US administration could fundamentally change the world’s trade and financial systems, according to Stephen Miran, head of the White House Council of Economic Advisers.

At the same time, Reuters notes that the greenback falling 15% during Trump’s first presidential term had no impact on the country’s trade deficit. Hence, the US might need to go to greater lengths to reduce this figure. Last year, the trade deficit reached $918 billion, or 3.1% of GDP. 

Hedge fund manager Andreas Steno Larsen believes a 20–25% decline in the dollar over the next two years could secure the elimination of the deficit. Meanwhile, according to Peter Hooper of Deutsche Bank, a 20–30% depreciation could be enough to reduce it by about 3% of GDP.