If our trade and current account deficits move toward balance, foreign economies will face the questions of how to replace the demand that will no longer be coming from the United States and to reallocate production to a new mix of spending. The U. S. current account will not correct in isolation.
The United States has been, in effect, exporting its demand overseas, supporting economic activity in foreign economies by importing more goods and services than we export. If our imports fall and exports rise, just the opposite will occur in the rest of the world. As our domestic demand is restrained relative to production, demand elsewhere will have to increase to foster global high employment.