Clearly, many people view the benefits of free trade as being outweighed by its perceived costs. One concern about free trade may be that it has given rise to large trade and current account deficits, thereby adding to the nation’s debt and putting future prosperity at risk.
Now at more than 5 percent of GDP, the current account deficit is in record territory, it is growing, and it cannot be sustained indefinitely. We cannot foresee when the deficit will stop growing and return to more-sustainable levels, through what mechanisms this adjustment will occur, or whether this adjustment will be smooth or disruptive for financial markets and the economy more generally.