> Trade deficit is effectively a migration of capital inflow, so tariffs should reduce not increase investments.
That seems backwards. A trade deficit (more goods coming into the country) should be balanced by a capital outflow (money leaving the country). We've sustained that for decades by printing more money and sending it around the world.
Some people think that's a good deal, because we get real stuff in exchange for money we create for nothing. But what will have left when other countries no longer want our money?
Edit: As the comment below points out, I should technically ask what happens when they no longer want U.S. government debt?
Money in this context is just a representation of value. You presume the money for foreign goods is leaving the USA when we import the goods, but that is actually not necessarily the case.
Make no mistake, these countries are getting something in return for the extra goods and services they give to us. It is not for free. One of the big things trade to China to make up this deficit is an investment in the US government (treasury notes) or assets. That is, they are taking the dollars they get and then parking it in the US as investment . The deficit is they're choosing us to invest in rather than themselves!
>The U.S. trade balance has been in a deficit position since the 1970s. This means that the total value of imported goods has been greater than the total value of exported goods. This means the U.S. is a “debtor” nation, running a merchandise trade deficit. However, the merchandise trade deficit refers only to imports and exports of goods and services. It shows that imports are greater than exports, hence the “deficit.” But, think about it for a minute, why does the world keep giving us goods, without getting goods from us in return? Is this a good deal or what? Well, clearly, this can’t be the whole story.
>What is happening is that the people from whom we buy goods abroad are taking our dollars investing in the U.S. economy. They may buy U.S. government debt (securities issued by the U.S. government to finance past federal budget deficits) or other assets in the U.S. For example, they may invest in U.S. companies.
https://www.csun.edu/sites/default/files/macro10_0.pdf