"For decades, our country has been looted, pillaged, raped and plundered by nations near and far," announced President Donald Trump. 

It was April 2, the day Trump announced sweeping tariffs on countries around the world. He called it Liberation Day. 

"Chronic trade deficits are no longer merely an economic problem," he declared. "They're a national emergency that threatens our security and our way of life."

In Trump's mind, deficits were the problem and tariffs were the solution. But what are these deficits, and why does Trump think they're so dangerous?

'Make America wealthy again' 

A trade deficit emerges when a country imports more than it exports. In other words, the value of foreign goods coming in is higher than the value of local goods going out.  

The United States has deficits with most countries. Its overall deficit in 2024 was $1.2 trillion. Trump doesn't like that, declaring that it's time to "make America wealthy again." 

He's pointed the finger at China, saying it's one of the biggest culprits. And the fact is, the U.S. does have a trade deficit with China - in 2024, it was just shy of $300 billion. 

But there's more to this deficit than meets the eye. Yes, the two countries have the world's biggest economies. Sure, they both trade in vast volumes. Yet, they are still very different. 

The numbers tell a story of their own. America's gross domestic product - a measure of total economic output - was roughly $29 trillion last year. China's was nearly $19 trillion. That's less than two-thirds the size of the U.S. economy. 

So, America has more money. And it likes to spend that money. Financial services firm, JP Morgan, says American households save, on average, about 5 percent of their income each month. Chinese families save almost 32 percent. 

The key takeaway - Americans splash the cash, the Chinese don't. More spending means more demand for goods, and that often means a bigger deficit.   

More bang for your buck?

There's another key difference - the money itself. China's yuan is weaker than the U.S. dollar, trading at around 7.3 to the greenback in early 2025. That exchange rate has helped Chinese firms, making their products relatively cheap for American consumers. 

Trump argues that this gives Chinese exporters an unfair advantage. But there's a flipside. Experts say Chinese products can also help curb inflation in the U.S., precisely because the yuan is weaker than the dollar. 

Researchers at the Peterson Institute tried to understand how Chinese imports affected inflation in 2022. They focused on the potential impact of reducing U.S. tariffs on products from China. 

It was clear that lower tariffs would make these goods cheaper. But the researchers were curious: what would happen if the White House cut tariffs by, say, 2 percent? The answer: inflation would drop 1.3 percent, saving the average American household nearly $800 a year.

For context, the International Monetary Fund expects U.S. consumer inflation to reach 3 percent this month. Slice 1.3 off that, and inflation is almost halved. The United States would also have one of the lowest inflation rates in the world. 

"It's not too late," said Trump on Liberation Day. "We're going to start being smart. We're going to start being wealthy again. They've taken so much of our wealth away from us."

Trade deficits are not just a matter of 'us' and 'them'. But Trump is clearly selling a different concept of the deficit to Americans. The question now - will they buy it?