How Bad Is The US-China Trade Deficit?

The US runs a trade deficit of $375bn with China, almost 2% of GDP. The UK has an equally large imbalance with the EU. These bilateral trade balances worry politicians: is one group of countries taking advantage of another? In this video I look at the causes of bilateral trade balances, and show why they can be spectacularly misleading, and also why governments and politicians should not worry unduly about them.