Yesterday Donald Trump and the CEO of the Japanese Softbank company announced a deal to invest $100B in the U.S. You can ignore the question of why investment by Japanese that Mr. Trump likes is good while Japanese investment in US Steel is bad, because a little cognitive dissonance is good for us all. The point of today’s short post is to point out the accounting identity of the balance of payments. According to Mr. Trump, a trade deficit (part of the current account) is a horribly bad thing. But a deficit in the current account must be matched by a surplus in the capital account, because by definition the balance of payments balances (to zero!). So if we get $100B in foreign investment in the U.S., the capital account goes up by $100B, which means the current account must fall by $100B. This isn’t some free market theory, this is simply accounting. So the click bait title of this post is exactly on point. But an increase in the trade deficit of $100B isn’t a bad thing. It’s just a thing.