What are the implications of persistent U.S. trade deficits?

Most economists see both benefits and costs to trade deficits. At the time a trade deficit is occurring, American consumers benefit. A trade deficit means that the United States is receiving more goods and services as imports from abroad than it is sending out as exports. This allows the U.S. to consume outside its production possibilities curve. But there is a catch, the gain in present consumption may come at the expense of reduced future consumption. On the other hand, a trade deficit means increased U.S. indebtedness. This is unfavorable because the trade deficit must be financed in some way; by borrowing from the rest of the world, selling off assets, or dipping into official reserves. However, the long-term impacts of the record-high U.S. trade deficits are largely unknown.