"American firms investing in Chinese manufacturing creates a trade deficit for America when in reality America benefits more then China from the investment."
Actually, investing in China has 0 initial impact on balance of trade. It has, however, a debit impact on the financial account, since dollars are leaving the US as investment. An investment nevertheless implies an implicit return on it, which will be recorded as a credit on the financial account when you repatriate the profit. The fact that importing the profit-generating product to your domicile would result in a trade deficit is largely irrelevant, since the profit from it would be a counterbalancing item in the balance of payments. Unless your country is the sole importer of said product, you will hardly run a balance of payment deficit due to such business arrangement,
Of course this whole argument is rather moot if we're specifically talking about the US. Pretty much all macroeconomic schools since the mercantilists have recommended some sort of positive balance of payments as a sign of successful governance. When all countries strive for positive balance of payments, there is naturally quite a shortage for countries with negative BoP to offset the positives - the accountancy is a zero-sum game after all. Apart from countries that failed in this global race (Greece), the only natural country to run a gigantic BoP deficit today is the US, home of the USD, the reserve currency of the world. As long as the USD is the reserve currency, BoP deficits are of little worry to the US, although it must be noted that the structure of the BoP deficit has been increasingly deteriorating since the moment Ronald Reagan assumed the office of POTUS. The previously healthy deficit consisting of exporting investment and capital in general (which, as mentioned, intrinsically imply a reverse inflow of profit sometime in the future) has been replaced with rather mundane import of consumer goods (which imply nothing of the sort). So the BoP deficit starts to lack natural negative feedback mechanisms that would keep it in check from possibly running rampant in case the USD uses its dominating position in the world economy. But as of now, this vulnerability does not bear any negative influence on the health of US economy. Really, the too-narrow-to-give-an-accurate-picture balance of trade deficit is usually used as a scapegoat for some other economic problem. Or rather, it is used to push agenda that is close to one's heart - protectionism, returning unviable jobs home, you pick your poison.