Trade deficit of a country (the one vs the rest of the world) is equal to investment of other people in the country, trade surplus equals investment in other countries.
Why is this so? Imagine there are only two countries in the world, USA and Japan, and US has a trade deficit. This means Japanese manufacturers sell their goods and do not convert all of what they earn in yen, they keep some part in US dollars. These money are directly or indirectly invested in US: if people keep these money in the bank, the bank invests them. Sorry, I'm not precise, but I hope you get the point.
Now, it doesn't say if the investment is good or bad: the invested money can be happily consumed and the investor could get less or nothing for his money. It doesn't also say who owns (controlls) what: it may turn out that after a while some part of the US economy is owned by Japanese, depending on what they choose to do with their money.
Why is this so? Imagine there are only two countries in the world, USA and Japan, and US has a trade deficit. This means Japanese manufacturers sell their goods and do not convert all of what they earn in yen, they keep some part in US dollars. These money are directly or indirectly invested in US: if people keep these money in the bank, the bank invests them. Sorry, I'm not precise, but I hope you get the point.
Now, it doesn't say if the investment is good or bad: the invested money can be happily consumed and the investor could get less or nothing for his money. It doesn't also say who owns (controlls) what: it may turn out that after a while some part of the US economy is owned by Japanese, depending on what they choose to do with their money.