Steve Hanke on why the American trade deficit is made in the U.S.:

To view the external balance correctly, we should direct our attention to the domestic economy. The external balance is homegrown; it is produced by the relationship between domestic savings and domestic investment. The national savings–investment gap, composed of the public savings–investment gap and the private savings–investment gap, determines the current-account balance. The U.S. external deficit, therefore, mirrors what is happening in the U.S. domestic economy.

Read the whole thing here.