March 11, 2019

Trade Deficit Surges

We're officially on Insta! Did I throw on a blazer at 5 am for all you lovely people? You bet I did!

“The Commerce Department said on Wednesday that a 12.4 percent jump in the goods deficit in December had contributed to the record $891.3 billion goods trade shortfall last year. The overall trade deficit surged 12.5 percent to $621.0 billion in 2018, the largest since 2008.” Reuters

Many on both sides agree that the increased trade deficit is not a sign of economic malaise, and, combined with other trends, is in fact an indicator that the economy is generally doing well:

“Imports grew faster than exports as the U.S. economy accelerated and much of the world slowed. The dollar grew stronger as capital flowed into the U.S., and the trade deficit grew to offset the larger capital inflows as it must by definition under the national income accounts… a larger trade deficit is a benign byproduct of a healthier American economy.”
Editorial Board, Wall Street Journal

“True, at times of high unemployment deficits can cost us jobs. But in normal times they don’t reduce overall employment, nor do they make us poorer. On the contrary, other countries are sending us valuable goods and services, which we’re paying for with pieces of paper — paper that pays very low interest rates.”
Paul Krugman, New York Times

See past issues

From the Left

The left criticizes Trump for focusing on reducing trade deficits, and his overall approach to trade.

“Not only did the trade deficit increase, it increased exactly where Trump said it wouldn’t… [But] the problem here is not really with Trump’s administration. The president can have some effect on international trade, but most of it is driven by the massive U.S. economy: Who buys what, from where. The problem was really that Trump made campaign trail promises he would always have had a challenge in fulfilling.”
Philip Bump, Washington Post

“[Trump] has picked trade wars the world over, with friends and foes alike… These actions and threats have led to some predictable consequences. One is that U.S. companies have stocked up on some imported goods to beat the tariffs, which increases imports in the short run. Higher imports = bigger trade deficit. Another is that other countries have levied their own retaliatory tariffs on our own products — most famously, red-state goods such as soybeans and bourbon. So there has been less demand for U.S. exports. Lower exports also = bigger trade deficit.”
Catherine Rampell, Washington Post

“The administration hoped that threatening our trade partners with tariffs would force them to negotiate new pacts that gave the U.S. a leg up in global commerce. But the results have been underwhelming. The new-and-sort-of-improved NAFTA makes some important changes around the edges of the agreement, including key ones to international dispute settlement, but is widely regarded as little more than a rebranding effort…

“The agreement shaping up between China and the U.S. is looking like even more of a disappointment. In return for lowering tariffs, China would buy more U.S. agricultural goods and lower some barriers that keep U.S. companies from operating there. It would do nothing regarding issues like intellectual property theft that are of much greater concern to U.S. corporations. Trump started an unprecedented trade war, and all we’re gonna get are some lousy soybean sales.”
Jordan Weissmann, Slate

Some note that, “Had the United States taken a different approach to industrial (and antitrust) policy over the past four decades, the dollar might be weaker; our manufacturing base stronger; the financial industry smaller; investment less concentrated in large urban centers; and many ordinary Americans better off. And a sufficiently committed ruling party — which is to say, one willing to embrace aggressive state intervention, and to run roughshod over entrenched interests — could conceivably bend our economy back in that direction… [But Trump’s] populist producerism was never a serious economic doctrine. It was a PR strategy.”
Eric Levitz, New York Magazine

Trump's “goal, it seems, is to put so much pressure on Tehran that it has no choice but to completely change its behavior — but he could end up leading the countries to the brink of war in the process… Now is typically the time when cooler heads prevail, but it’s unclear if there are cooler heads around… It’s hard to overstate how avoidable this situation was.”
Alex Ward, Vox

“In theory, there’s no reason why a bad businessman can’t go on to become a good president. But a commander-in-chief whose signature legislative achievement expanded tax loopholes that he himself describes as grossly unfair is pretty much a bad president, by definition.”
Eric Levitz, New York Magazine

From the Right

The right praises Trump’s policies for creating a strong economy.

From the Right

The right praises Trump’s policies for creating a strong economy.

“In 2018, the US imported about $2.6 billion in goods produced in other countries and we exported only about $1.7 billion of US goods produced here… That ‘unfavorable trade imbalance’ as the media frequently describes it, was actually a ‘favorable trade balance’ for the US viewed differently, since we benefited from a ‘net inflow of goods’ of nearly $1 trillion.”
Mark Perry, American Enterprise Institute

“The current growth in the U.S. trade deficit is simply due to Americans buying and selling more… [Moreover] America actually has a capital surplus, meaning companies and individuals around the world invest more money in the U.S. than we do abroad… When individuals have the freedom to buy and sell with the world—free of government intervention—businesses are forced to compete and innovate more, resulting in more choices in the marketplace…

“Rather than focusing on the trade deficit, Congress, the Trump administration, and even the media should focus more on the barriers imposed by governments (including the U.S.’) to limit trade freedom, what the real-life effects of those barriers are, and how we can fix them.”
Tori Whiting, Daily Signal

“President Trump promised to bring down the trade deficit, but it hit a 10-year high last year. But, given that we don't subscribe to the president's zero-sum approach to trade, our reaction to the news is to raise a glass to the Trump economy…

“Trump is right to care about the manufacturing industry. Manufacturing jobs from World War II until recent decades were excellent sources of wealth and stability for the middle class and working class… But manufacturing isn’t going away. As a share of the economy, manufacturing is stable. Last year saw a big uptick in our manufacturing and exports. The Federal Reserve reported Wednesday ‘slight-to-moderate’ manufacturing growth in almost all of the country… America’s $2.5 trillion in exports represents a 6.3 percent increase from 2017… We hope President Trump does not get tired of this winning.”
Editorial Board, Washington Examiner

Some argue that “a trade deficit reducing tariff would have to be much higher, perhaps even exceeding the 25 percent that was supposed to apply two months ago… The 10 percent [tariff] was not a tariff designed to reduce the trade deficit. It was the tariff designed to get China’s attention. Which it did, forcing China to cease its threats of retaliation in favor of negotiating with the U.S… Wednesday’s trade deficit figures strengthen the Trump administration’s hand because they demonstrate that China has much more at stake than the U.S. in keeping tariffs from escalating.”
John Carney, Breitbart

Some argue, “It stands to reason that if Kim is willing to starve his own people, deprive his economy of any growth, and pour billions of dollars into missile tech, he will, at some point, develop weapons America and its allies mastered decades ago. And short of an invasion or a diplomatic agreement, under the present circumstances, there is very little we can do to stop him… Taking a hardline approach—what many call the ‘big deal’—or only granting sanctions relief after full denuclearization and the end of Kim’s missile programs is completely impractical and something North Korea would never agree to… only a step-by-step process of disarming Pyongyang, where each side gets a benefit for making a concession, will work.”
Harry J. Kazianis, The American Conservative

Others posit that “the reason Kim is developing missiles that can strike Seattle or LA is that 28,000 U.S. troops are in South Korea… If we cannot persuade Pyongyang to give up its nuclear weapons in return for a lifting of sanctions, perhaps we should pull U.S. forces off the peninsula and let China deal with the possible acquisition of their own nuclear weapons by Japan, South Korea, and Taiwan…

“After an exhausting two weeks [between North Korea, Iran, Venezuela, and others], one is tempted to ask: How many quarrels, clashes and conflicts can even a superpower manage at one time? And is it not the time for the United States, preoccupied with so many crises, to begin asking, ‘Why is this our problem?’”
Pat Buchanan, Townhall

Counterpoint: “after the War of 1812, President Madison… enacted the Tariff of 1816 to price British textiles out of competition, so Americans would build the new factories and capture the booming U.S. market. It worked. Tariffs [also] financed Mr. Lincoln’s War. The Tariff of 1890 bears the name of Ohio Congressman and future President William McKinley, who said that a foreign manufacturer ‘has no right or claim to equality with our own… He pays no taxes. He performs no civil duties’… [A tariff’s] purpose is not just to raise revenue but to make a nation economically independent of others, and to bring its citizens to rely upon each other rather than foreign entities.”
Patrick J. Buchanan, The American Conservative

A libertarian's take

“The scoop reflects poorly on Trump, who willfully misled the public for a decade in hopes of fraudulently representing himself as a man with a Midas touch. But he could not have succeeded without the assistance of many Americans, some mercenary, others over-credulous, who helped to spread the deceit and deception, generating countless newspaper articles, magazine stories, and TV segments that misinformed the public about the publicity hound’s record in business. New evidence of his staggering losses in that decade therefore provides an apt occasion to reflect on the media’s complicity in Trump’s brazen deceit and deception… Let [this] be a lesson for today’s tabloids, gossip columnists, over-credulous or mercenary journalists, and reality-television producers.”
Conor Friedersdorf, The Atlantic

On the bright side...

Mooove over, LTE: 'Me+Moo' uses 5G to connect you to real-life cow.
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