Why Trump lost his battle against the trade deficit

“the U.S. trade gap is on track to exceed $600 billion this year. That would be the highest since 2008, just before the global financial crisis.

The monthly deficit in U.S. goods trade with all other countries set a record high in August at more than $83 billion.

Trump has blamed the trade deficit on bad trade deals negotiated by his predecessors and unfair trade practices by other countries, but most economists disagree with that explanation.”

“A variety of factors contributed to Trump’s failure to eliminate the trade gap, which White House trade adviser Peter Navarro predicted in 2016 could be erased in one or two years.

Overall trade remains depressed compared to year-ago levels because of the coronavirus pandemic.

But the massive U.S. government stimulus payments to businesses and consumershave helped U.S. imports recover faster than U.S. exports. That explains why the monthly goods deficit has increased from the average level of $73.3 billion in 2019.

However,even without the pandemic, Trump’s practice of piling tariffs on China and selected other products like steel and aluminum was never going to turn around the deficit, most economists agree.”

” The large U.S. trade deficit is fundamentally driven by larger economic factors — like the fact Americans spend more than they save and have to borrow from abroad to finance the difference”

“Trump’s $1.5 trillion tax cut in 2017 contributed to that problem by running up the U.S. budget deficit.”

“Looking at trade in 2019, the last full year of data, the overall U.S. trade deficit fell by less than 1 percent from the previous year to $577 billion. However, the bilateral trade deficit with China fell by a much more impressive 17 percent to $345 billion as importers turned to other countries such as Mexico, Vietnam, Taiwan, South Korea, Japan and members of the EU.”

““We would say one of the big failures of the Trump administration with respect to trade policy is the failure to address currency misalignment in any kind of meaningful way,” said Thea Lee, president of the Economic Policy Institute, a left-leaning think tank aligned with union groups. “Putting a couple of sentences into the deal, but without a clear road map as to how it’s going to be instrumentalized, doesn’t really do very much.””

“Trump’s revised NAFTA agreement with Mexico and Canada does include strong protections for workers rights, which helped the pact win overwhelming approval in the Democratic-controlled House. But the fact that labor concerns were not addressed in the China agreement “just shows that the Trump administration is not driven by any principles in this area, but simply by political expediency,” Lee said.

The administration hails China’s agreement as part of the phase one trade deal to purchase $200 billion more of U.S. goods and services in 2020 and 2021, compared with the record it set in 2017.

But the data released on Tuesday shows that China is well behind on that goal. During the first eight months of this year, it had imported just $69.5 billion worth of U.S. farm and manufactured goods, compared to $80.2 billion in the same period in 2017.

U.S. farmers were hit so hard by Trump’s tariff war with China that his administration doled out more than $20 billion in emergency aid payments to help cushion the blow.

U.S. farm exports to China had reached as high as $25 billion annually a few years before Trump was elected. But they plummeted to $6.8 billion in fiscal 2019 after Beijing retaliated against Trump’s tariffs by raising its own duties on U.S. farm exports.”

https://www.politico.com/news/2020/10/06/trump-trade-deficit-426805

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