{"id":167,"date":"2025-06-20T08:06:34","date_gmt":"2025-06-20T12:06:34","guid":{"rendered":"https:\/\/people.bsu.edu\/econbriefs\/?p=167"},"modified":"2025-06-20T08:06:34","modified_gmt":"2025-06-20T12:06:34","slug":"tariffs-and-the-global-ledger-by-dr-cecil-bohanon-and-dr-john-horowitz","status":"publish","type":"post","link":"https:\/\/people.bsu.edu\/econbriefs\/2025\/06\/20\/tariffs-and-the-global-ledger-by-dr-cecil-bohanon-and-dr-john-horowitz\/","title":{"rendered":"Tariffs and the Global Ledger \u2013 by Dr. Cecil Bohanon and Dr. John Horowitz"},"content":{"rendered":"<p><em>Originally written on 4\/8\/2025<\/em><\/p>\n<p><span data-contrast=\"auto\">President Trump\u2019s tariffs, announced on April 2, 2025, have rocked financial markets and the world economy. There is so much to examine we hardly know where to begin. We will focus on some fundamental facts about the Balance of Payments.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">The Balance of Payments is an accounting device used to track a nation\u2019s financial\/economic interactions with the rest of the world. Its basic form has two major components: the Current Account and the Capital Account. In the simplest terms, the Current Account is the balance of trade in goods and services, and the Capital Account is the balance of trade in financial assets. A nation\u2019s balance on its Current Account is offset by an equal and opposite balance on its Capital Account.\u00a0<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Suppose the US sells $3 trillion of goods and services to the rest of the world and buys $4 trillion of goods and services from the rest of the world. In other words, the USA has a trade deficit of $1 trillion, where US imports are $1 trillion more than exports, which creates a Current Account deficit of $1 trillion and a $1 trillion Capital Account surplus.\u00a0<\/span><span data-ccp-props=\"{&quot;335559731&quot;:720}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">The $1 trillion Capital Account surplus is because the US had net imports of $1 trillion, and in return, the rest of the world acquired $1 trillion in claims on US goods and services that can be redeemed in the future. The $1 trillion is an asset to the rest of the world. The Balance of Payments equals zero since the Current Account deficit equals the Capital Account surplus.\u00a0\u00a0<\/span><span data-ccp-props=\"{&quot;335559731&quot;:720}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">From the above example, it is easy to think that the Capital Account balance is a passive by-product of the Current Account balance. But that is not necessarily the case. Typically, foreigners do not hold the excess dollars earned as cash. At the very least, they deposit them in dollar bank accounts or US government bonds to earn interest. They also use the dollars to buy US-based portfolio assets, such as US common stocks, businesses in the US, and US real estate. Foreign investment in the US increases the US Capital Account balance and decreases the Current Account balance. Indeed, the Balance of Payments can be driven by the desire of foreigners to buy US assets, with the trade balance being an afterthought. Did the trade deficit cause foreign investment in the US, or did foreign investment in the US cause the trade deficit? We\u2019ll leave that to another column.\u00a0<\/span><span data-ccp-props=\"{&quot;335559731&quot;:720}\">\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Originally written on 4\/8\/2025 President Trump\u2019s tariffs, announced on April 2, 2025, have rocked financial markets and the world economy. There is so much to examine we hardly know where to begin. We will focus on some fundamental facts about the Balance of Payments.\u00a0 The Balance of Payments is an accounting device used to track [&hellip;]<\/p>\n","protected":false},"author":112,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[85],"tags":[1582,1583,1584,1565,1585,1215,106,1062,1318,1271,1525,395],"class_list":["post-167","post","type-post","status-publish","format-standard","hentry","category-macroeconomics","tag-balance-of-payments","tag-capital-account","tag-current-account","tag-foreign-investment","tag-global-markets","tag-international-trade","tag-macroeconomics","tag-tariffs","tag-trade-deficit","tag-trade-policy","tag-trump-administration","tag-u-s-economy"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Tariffs and the Global Ledger \u2013 by Dr. Cecil Bohanon and Dr. John Horowitz - Econ Briefs<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/people.bsu.edu\/econbriefs\/2025\/06\/20\/tariffs-and-the-global-ledger-by-dr-cecil-bohanon-and-dr-john-horowitz\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Tariffs and the Global Ledger \u2013 by Dr. Cecil Bohanon and Dr. John Horowitz - Econ Briefs\" \/>\n<meta property=\"og:description\" content=\"Originally written on 4\/8\/2025 President Trump\u2019s tariffs, announced on April 2, 2025, have rocked financial markets and the world economy. There is so much to examine we hardly know where to begin. We will focus on some fundamental facts about the Balance of Payments.\u00a0 The Balance of Payments is an accounting device used to track [&hellip;]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/people.bsu.edu\/econbriefs\/2025\/06\/20\/tariffs-and-the-global-ledger-by-dr-cecil-bohanon-and-dr-john-horowitz\/\" \/>\n<meta property=\"og:site_name\" content=\"Econ Briefs\" \/>\n<meta property=\"article:published_time\" content=\"2025-06-20T12:06:34+00:00\" \/>\n<meta name=\"author\" content=\"christianhartselle\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"christianhartselle\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/people.bsu.edu\/econbriefs\/2025\/06\/20\/tariffs-and-the-global-ledger-by-dr-cecil-bohanon-and-dr-john-horowitz\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/people.bsu.edu\/econbriefs\/2025\/06\/20\/tariffs-and-the-global-ledger-by-dr-cecil-bohanon-and-dr-john-horowitz\/\"},\"author\":{\"name\":\"christianhartselle\",\"@id\":\"https:\/\/people.bsu.edu\/econbriefs\/#\/schema\/person\/53f4e0b981fd42f34cbb306b9ad62622\"},\"headline\":\"Tariffs and the Global Ledger \u2013 by Dr. Cecil Bohanon and Dr. John Horowitz\",\"datePublished\":\"2025-06-20T12:06:34+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/people.bsu.edu\/econbriefs\/2025\/06\/20\/tariffs-and-the-global-ledger-by-dr-cecil-bohanon-and-dr-john-horowitz\/\"},\"wordCount\":417,\"commentCount\":0,\"keywords\":[\"balance of payments\",\"capital account\",\"current account\",\"foreign investment\",\"global markets\",\"international trade\",\"macroeconomics\",\"tariffs\",\"trade deficit\",\"trade policy\",\"Trump administration\",\"U.S. economy\"],\"articleSection\":[\"Macroeconomics\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/people.bsu.edu\/econbriefs\/2025\/06\/20\/tariffs-and-the-global-ledger-by-dr-cecil-bohanon-and-dr-john-horowitz\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/people.bsu.edu\/econbriefs\/2025\/06\/20\/tariffs-and-the-global-ledger-by-dr-cecil-bohanon-and-dr-john-horowitz\/\",\"url\":\"https:\/\/people.bsu.edu\/econbriefs\/2025\/06\/20\/tariffs-and-the-global-ledger-by-dr-cecil-bohanon-and-dr-john-horowitz\/\",\"name\":\"Tariffs and the Global Ledger \u2013 by Dr. Cecil Bohanon and Dr. John Horowitz - Econ Briefs\",\"isPartOf\":{\"@id\":\"https:\/\/people.bsu.edu\/econbriefs\/#website\"},\"datePublished\":\"2025-06-20T12:06:34+00:00\",\"author\":{\"@id\":\"https:\/\/people.bsu.edu\/econbriefs\/#\/schema\/person\/53f4e0b981fd42f34cbb306b9ad62622\"},\"breadcrumb\":{\"@id\":\"https:\/\/people.bsu.edu\/econbriefs\/2025\/06\/20\/tariffs-and-the-global-ledger-by-dr-cecil-bohanon-and-dr-john-horowitz\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/people.bsu.edu\/econbriefs\/2025\/06\/20\/tariffs-and-the-global-ledger-by-dr-cecil-bohanon-and-dr-john-horowitz\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/people.bsu.edu\/econbriefs\/2025\/06\/20\/tariffs-and-the-global-ledger-by-dr-cecil-bohanon-and-dr-john-horowitz\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/people.bsu.edu\/econbriefs\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Tariffs and the Global Ledger \u2013 by Dr. Cecil Bohanon and Dr. John Horowitz\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/people.bsu.edu\/econbriefs\/#website\",\"url\":\"https:\/\/people.bsu.edu\/econbriefs\/\",\"name\":\"Econ Briefs\",\"description\":\"\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/people.bsu.edu\/econbriefs\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/people.bsu.edu\/econbriefs\/#\/schema\/person\/53f4e0b981fd42f34cbb306b9ad62622\",\"name\":\"christianhartselle\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/people.bsu.edu\/econbriefs\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/99dffdd2c9bd490eefa22ed0b6d8d8a277b0368e88948df516427d91d6bf8ea5?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/99dffdd2c9bd490eefa22ed0b6d8d8a277b0368e88948df516427d91d6bf8ea5?s=96&d=mm&r=g\",\"caption\":\"christianhartselle\"},\"url\":\"https:\/\/people.bsu.edu\/econbriefs\/author\/christianhartselle\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Tariffs and the Global Ledger \u2013 by Dr. Cecil Bohanon and Dr. John Horowitz - Econ Briefs","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/people.bsu.edu\/econbriefs\/2025\/06\/20\/tariffs-and-the-global-ledger-by-dr-cecil-bohanon-and-dr-john-horowitz\/","og_locale":"en_US","og_type":"article","og_title":"Tariffs and the Global Ledger \u2013 by Dr. Cecil Bohanon and Dr. John Horowitz - Econ Briefs","og_description":"Originally written on 4\/8\/2025 President Trump\u2019s tariffs, announced on April 2, 2025, have rocked financial markets and the world economy. There is so much to examine we hardly know where to begin. We will focus on some fundamental facts about the Balance of Payments.\u00a0 The Balance of Payments is an accounting device used to track [&hellip;]","og_url":"https:\/\/people.bsu.edu\/econbriefs\/2025\/06\/20\/tariffs-and-the-global-ledger-by-dr-cecil-bohanon-and-dr-john-horowitz\/","og_site_name":"Econ Briefs","article_published_time":"2025-06-20T12:06:34+00:00","author":"christianhartselle","twitter_card":"summary_large_image","twitter_misc":{"Written by":"christianhartselle","Est. reading time":"2 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/people.bsu.edu\/econbriefs\/2025\/06\/20\/tariffs-and-the-global-ledger-by-dr-cecil-bohanon-and-dr-john-horowitz\/#article","isPartOf":{"@id":"https:\/\/people.bsu.edu\/econbriefs\/2025\/06\/20\/tariffs-and-the-global-ledger-by-dr-cecil-bohanon-and-dr-john-horowitz\/"},"author":{"name":"christianhartselle","@id":"https:\/\/people.bsu.edu\/econbriefs\/#\/schema\/person\/53f4e0b981fd42f34cbb306b9ad62622"},"headline":"Tariffs and the Global Ledger \u2013 by Dr. Cecil Bohanon and Dr. John Horowitz","datePublished":"2025-06-20T12:06:34+00:00","mainEntityOfPage":{"@id":"https:\/\/people.bsu.edu\/econbriefs\/2025\/06\/20\/tariffs-and-the-global-ledger-by-dr-cecil-bohanon-and-dr-john-horowitz\/"},"wordCount":417,"commentCount":0,"keywords":["balance of payments","capital account","current account","foreign investment","global markets","international trade","macroeconomics","tariffs","trade deficit","trade policy","Trump administration","U.S. economy"],"articleSection":["Macroeconomics"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/people.bsu.edu\/econbriefs\/2025\/06\/20\/tariffs-and-the-global-ledger-by-dr-cecil-bohanon-and-dr-john-horowitz\/#respond"]}]},{"@type":"WebPage","@id":"https:\/\/people.bsu.edu\/econbriefs\/2025\/06\/20\/tariffs-and-the-global-ledger-by-dr-cecil-bohanon-and-dr-john-horowitz\/","url":"https:\/\/people.bsu.edu\/econbriefs\/2025\/06\/20\/tariffs-and-the-global-ledger-by-dr-cecil-bohanon-and-dr-john-horowitz\/","name":"Tariffs and the Global Ledger \u2013 by Dr. Cecil Bohanon and Dr. John Horowitz - Econ Briefs","isPartOf":{"@id":"https:\/\/people.bsu.edu\/econbriefs\/#website"},"datePublished":"2025-06-20T12:06:34+00:00","author":{"@id":"https:\/\/people.bsu.edu\/econbriefs\/#\/schema\/person\/53f4e0b981fd42f34cbb306b9ad62622"},"breadcrumb":{"@id":"https:\/\/people.bsu.edu\/econbriefs\/2025\/06\/20\/tariffs-and-the-global-ledger-by-dr-cecil-bohanon-and-dr-john-horowitz\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/people.bsu.edu\/econbriefs\/2025\/06\/20\/tariffs-and-the-global-ledger-by-dr-cecil-bohanon-and-dr-john-horowitz\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/people.bsu.edu\/econbriefs\/2025\/06\/20\/tariffs-and-the-global-ledger-by-dr-cecil-bohanon-and-dr-john-horowitz\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/people.bsu.edu\/econbriefs\/"},{"@type":"ListItem","position":2,"name":"Tariffs and the Global Ledger \u2013 by Dr. Cecil Bohanon and Dr. John Horowitz"}]},{"@type":"WebSite","@id":"https:\/\/people.bsu.edu\/econbriefs\/#website","url":"https:\/\/people.bsu.edu\/econbriefs\/","name":"Econ Briefs","description":"","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/people.bsu.edu\/econbriefs\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/people.bsu.edu\/econbriefs\/#\/schema\/person\/53f4e0b981fd42f34cbb306b9ad62622","name":"christianhartselle","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/people.bsu.edu\/econbriefs\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/99dffdd2c9bd490eefa22ed0b6d8d8a277b0368e88948df516427d91d6bf8ea5?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/99dffdd2c9bd490eefa22ed0b6d8d8a277b0368e88948df516427d91d6bf8ea5?s=96&d=mm&r=g","caption":"christianhartselle"},"url":"https:\/\/people.bsu.edu\/econbriefs\/author\/christianhartselle\/"}]}},"_links":{"self":[{"href":"https:\/\/people.bsu.edu\/econbriefs\/wp-json\/wp\/v2\/posts\/167","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/people.bsu.edu\/econbriefs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/people.bsu.edu\/econbriefs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/people.bsu.edu\/econbriefs\/wp-json\/wp\/v2\/users\/112"}],"replies":[{"embeddable":true,"href":"https:\/\/people.bsu.edu\/econbriefs\/wp-json\/wp\/v2\/comments?post=167"}],"version-history":[{"count":0,"href":"https:\/\/people.bsu.edu\/econbriefs\/wp-json\/wp\/v2\/posts\/167\/revisions"}],"wp:attachment":[{"href":"https:\/\/people.bsu.edu\/econbriefs\/wp-json\/wp\/v2\/media?parent=167"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/people.bsu.edu\/econbriefs\/wp-json\/wp\/v2\/categories?post=167"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/people.bsu.edu\/econbriefs\/wp-json\/wp\/v2\/tags?post=167"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}