Donald Trump has spent most of this year trashing America’s diplomatic credibility, undermining one of his party’s core business interests, and freaking out his beloved stock market — all in service of one overriding policy goal: reducing our nation’s trade deficit.
So, exactly how much trade rebalancing did the president get out of antagonizing America’s core allies, Iowa’s soybean farmers, and Xi Jinping?
On Wednesday, the Commerce Department provided Trump with a grim answer: In July, the U.S. trade deficit soared by 9.5 percent to $50.1 billion, putting America on pace for its largest annual gap in a decade. Meanwhile, in spite of Trump’s tariffs, our nation’s trade deficit with China swelled to a record $36.8 billion.
These numbers don’t just undermine Trump’s (largely irrational) goals for trade policy. They also suggest that GDP growth is likely to dip in the third quarter, despite Trump’s predictions to the contrary. Last quarter, the U.S. economy grew at a 4.1 percent annual rate, its strongest showing since 2014. The president promptly announced that this was only the beginning, as “we’re going to go a lot higher than these numbers” in the coming months.
But that second-quarter GDP figure was inflated by a fleeting distortion in global trade patterns: When American producers increase their exports, GDP goes up, and ironically, Trump’s various protectionist measures spurred a boom for U.S. exporters because foreign buyers were eager to stock up on American goods before their governments slapped retaliatory tariffs on such products. Thus, the U.S. exported 50 percent more soybeans in May 2018 than it had in May 2017. But since this increase was driven by trade-war fears (as opposed to an explosion in global demand for American agriculture), the U.S. effectively “cashed in” much of its annual export-driven growth in the second quarter. Thus, many economists expected exports to plunge in the second half of 2018 — and take GDP growth down with it. Today’s Commerce Department report affirms that assumption.
Still, one has to give Trump the benefit of the doubt. Surely, there must be a coherence to his trade policy that eludes the untrained eye. After all, as this one-line excerpt from Bob Woodward’s new book makes clear, Trump has mapped out his global economic strategy in meticulous detail:
Trump was editing an upcoming speech with [then-staff secretary Rob] Porter. Scribbling his thoughts in neat, clean penmanship, the president wrote, “TRADE IS BAD.”