Trade talks can't solve America's twin deficits

The trade war truce agreed upon by President Xi Jinping and President Trump at the G20 Osaka summit is very good news for the economies of both countries. Highly disruptive breaks in supply networks and in established trading patterns will be avoided. Everyone from soybean farmers to high-tech companies can breathe a tentative sigh of relief.

But it is important to realize that no possible trade agreement can reduce the overall trade deficit of the US, which stood at $879 billion in 2018, or any other nation. A country's trade deficit is not determined by exchange rates or by tariffs. Instead, it is determined primarily by the domestic savings and investment rates within the country itself.

The US faces a coming crisis in its twin deficits - large and growing government budget deficits and trade deficits. Both are caused by a lack of savings.