A college student asks if there is a link between the two:
Over the years in which the US has abolished trade barriers and enacted a multitude of international free trade agreements we have experienced a massive increase in trade deficits, national debt, as well as personal debt. I can see the obvious connection between free trade trade, trade deficit’s and national debt but is there a connection between free trade and the rising PERSONAL debt? If so what is this connection? Furthermore if we had trade barriers in place would Americans not still have rising personal debt as they instead spend the same amount on domestic products rather than international?
There is certainly a correlation between increasingly free trade and private debt, but I doubt the relationship is a causal one. For one thing, the decline in private debt which began in 2008 was neither caused nor echoed by a similar decline in free trade.
The economic logic also doesn’t support a causal link. Private debt is mostly linked to big-ticket items such as homes and cars. Free trade in goods is mostly neutral on the former and negative on the latter with regards to debt. While the free movement of peoples would tend to increase debt, more people being able to take out more loans, that’s not going to alter the debt per capita rate much, for obvious reasons.
One of the major components of private debt is education-related debt, and that has nothing to do with free trade. So, I would say there is no meaningful link between free trade and private debt.