As we all know, Donald Trump really, really hates trade deficits. Indeed, he pretty clear believes trade balances are the yardstick by which to measure a nation’s strength, which means that countries running overall trade deficits are losers. Inversely, it also means measures aimed at reversing trade deficits — like the tariffs he has been imposing on imports from Canada, Europe, China and Japan — are self-evidently smart, and “trade wars” are not only “easy” but essential. In fact, he thinks all trading is a matter of war, with but one winner and one loser in every case:
Given Trump’s attitude and focus on trade deficits, it is worth more than passing attention that our country’s trade balances are getting worse with the great economic nationalist in charge, as the Washington Post’s Heather Long notes:
The United States trade deficit widened in June and is on track to be the biggest in a decade despite President Trump’s efforts to slash it.
For the first half of 2018, the trade deficit in goods and services hit $291.2 billion, the federal government reported Friday, which is higher than last year and puts the nation on track to have the largest annual deficit since 2008.
But wait: Didn’t Trump recently brag that he had already turned trade deficits around? Yes, but it was very much fake news:
Trump stood outside the White House a week ago and declared victory that he had reduced the trade deficit in the spring, but the figure he was using to make that claim was that there was a slight reduction in the trade deficit from the first quarter of this year to the second quarter. He left out the fact that the first quarter deficit was the highest since before the financial crisis.
U.S. exports had an unusual surge this spring as other countries rushed to buy U.S. goods before tariffs went into effect. The vast majority of economists expect that rush to buy before the trade war escalated will be followed by lower than usual exports in the second half of the year. The widening trade deficit in June is a sign it’s starting to play out that way.
The irony is that other economic phenomena that Trump very much wants to brag about are making trade deficits worse:
[A] big driving factor behind the higher trade deficit this year is that U.S. consumers are buying more stuff. That’s happening largely because the U.S. economy is doing well and people feel bullish enough to shop more for goods. Trump’s tax cuts have also helped fuel the buying spree for foreign products.
Making fun of Trump’s economic ignorance and contradictory claims isn’t very enjoyable when you realize that his sole policy impulse in dealing with growing trade balances is likely to be a doubling or tripling down on tariffs and other trade barriers. These can have all sorts of dangerous effects, ranging from a general shrinkage of international commerce to domestic inflation pressures (leading in turn to a tightening of credit by the Fed, and then quite possibly a major economic downturn).
Maybe it’s good that the president believes his economic policies are an unalloyed success. If he ever decides he’s losing, his countermeasures will likely make losers of us all.
