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| Inside Trump's plan to blow up [and not send down] the US trade deficit to kingdom come. |
Trump claims that his various trade wars--against Europe, Asia, North America, and pretty much everybody else--are intended to bring down the US trade deficit. While it's true that the US trade deficit is large, many have argued that it's not really the result of unfair trading practices of the United States' trade partners but rather the Americans' woeful lack of savings. At any rate, despite all Trump's huffing and puffing, the United States' trade deficit for July
exploded upwards:
The Commerce Department said on Tuesday the goods trade gap surged 6.3 percent to $72.2 billion last month. Exports of goods dropped 1.7 percent to $140.0 billion, weighed down by a 6.7 percent plunge in shipments of food, feeds and beverages...
Last month, there were also decreases in exports of capital and consumer goods, though motor vehicle exports rose. Imports of goods increased 0.9 percent to $212.2 billion in July, boosted by imports of food, industrial supplies and capital goods.
Why is it that the US trade deficit looks like ballooning instead of narrowing despite all the American demagoguery aimed at virtually all of its trading partners? Phil Levy at
Forbes offers a succinct
explanation as to why the Trump administration's actions are precisely the opposite of what you'd do to decrease the American trade deficit:
If there were a three-part plan to increase the trade deficit, the first part would attempt to boost investment in the United States while trimming national saving...The trick to expanding the trade deficit would be to make sure that federal budget deficits increase. Unless there is an offsetting move in other domestic saving, this should cut national saving. The combination of investment incentives and government dissaving would be a strong start toward growing the trade deficit.
You'd also verbally undermine others' economies, thus reducing their demand for imports from countries like the US:
The second part of the plan would be to undercut growth in major trading partner economies...the trick would be to instill doubt and foster economic turmoil in partners such as the European Union and China. If the United States could effectively destabilize those economies, U.S. exports should fall. If you pair that with rapid U.S. growth, it should also grow the U.S. trade deficit.
And, for the
coup de grace, you'd engineer a currency crisis in other countries that drives up the value of the dollar relative to other currencies:
The third and final element would be to try and stoke a currency crisis of some sort. Perhaps find an emerging market that is teetering and see if you can push it over the edge. Not only will this directly affect trade with the target country – as its currency falls, its goods look cheaper for the United States to import and U.S. goods look more expensive for export.
By
blasting China's economy as "weak" and
stoking a holy war with predominantly Islamic Turkey over a detained American pastor that's driving the Turkish lira down, Trump is certainly doing all of these things. Don't be surprised, then, if the US trade deficit continues marching upwards since Trump certainly appears to be doing all these things designed to do so.
