President Trump doesn’t understand that the trade deficit is not an accounts payable that the United States must settle by writing a big check. He insists money is being “taken out” of the United States. That’s just wrong. It’s also wrong to assert that a big trade deficit means high unemployment or a rotten economy. In fact, Trump has proved as much.
The Commerce Department said Wednesday that — despite more than two years of President Trump’s “America First” policies — the United States last year posted a $891.2 billion merchandise trade deficit, the largest in the nation’s 243-year history.
The trade gap with China also hit a record $419 billion, underscoring the stakes for the president’s bid to reach a deal with Chinese President Xi Jinping as soon as this month. . . .The shortfall topped the 2006 record of $838.3 billion, set as the housing bubble was peaking, and marked the third consecutive year of rising deficits.
Maybe Trump will go back to German Chancellor Angela Merkel for one more tutoring session on trade. When we purchase more German or Chinese or whoever’s goods than they purchase of ours, they have a whole lot of U.S. dollars — which they use to invest in our economy, create jobs and generate more wealth. No matter how many times Merkel points to German plants in the U.S. producing cars and employing Americans, Trump doesn’t get it.
For all of the tariff wars and fights with allies, Trump didn’t even accomplish his goal. But he did inflict pain on farmers (who now require billions in taxpayer subsidies) and increase costs for American consumers, including U.S.-based businesses that rely on foreign suppliers. In sum, his entire trade policy has failed and has in fact been counterproductive. He set out to fix a non-problem (a trade deficit) and created real ones including international conflict, higher consumer prices and gross inefficiency in our economy when certain businesses have lobbying clout to get tariff exemptions and others do not.
In essence, Trump has imposed a giant tax on Americans:
“When we impose a tariff, it is the domestic consumers and purchasers of imports that bear the full cost of the tariffs,” said David Weinstein, an economics professor at Columbia University, who co-wrote one of the papers. . . .
Weinstein’s study, co-written with Mary Amiti of the Federal Reserve Bank of New York and Princeton University’s Stephen J. Redding, reviewed what actually occurred last year after U.S. tariffs took effect. It concluded that Americans paid the entire tariff bill.
A second study — by four economists from the University of California at Los Angeles, Yale University, the University of California at Berkeley and Columbia University — reached the same conclusion.
What’s more, it’s Trump voters who have absorbed the brunt of the pain. That second study referenced above also showed that “workers in Republican-leaning counties, especially in farm states, suffered the greatest losses from tariffs that U.S. trading partners imposed in retaliation for the president’s actions.”
Republicans in Congress have been too timorous to claw back tariff power to stop this economic idiocy. And too many Democrats have been on the protectionist bandwagon to credibly criticize Trump.
Here’s an idea: Republican presidential primary challengers and Democratic contenders should go after Trump for hurting Americans. What’s he got against hard-working farmers, middle-class consumers struggling to buy a washer and dryer, and American car companies who have to pay extra for steel and aluminum, which, in turn, gets passed on to consumers? Trump may think he’s winning, but he’s apparently too dim to realize Americans are losing.
Washington Gov. Jay Inslee (D) knows this. His state is the fifth-hardest hit by Trump’s tariffs. Former San Antonio mayor Julián Castro, whose state is the sixth-most reliant on trade, also knows the risk of trade wars. Washington ranks eighth in that department, and Sen. Cory Booker’s state of New Jersey is ninth. They and other Democrats should stop mimicking Trump’s economic silliness, pledge to end trade wars, vow to open up markets, and then outline a generous and comprehensive package to address workers and regions adversely impacted by trade. They should also promise to go after a serious problem — China’s theft of our intellectual property — via the World Trade Organization. Oddly, Trump, ever the sucker for a dictator, hasn’t done anything on that front, perhaps because his “friend” President Xi Jinping rolled out the red carpet and complimented Trump. Democrats, if they play this smart, have a chance to make the case that Trump is too ignorant and gullible to protect the well-being of U.S. consumers, workers and producers.