Trade Deficit Hitting Records Under Trump

Toro

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That's Trump's "fault" in that his policies have made the economy stronger.

If a country has an insufficient amount of savings to finance their consumption and investment, as America has, they have to import capital from abroad. The only way to finance capital inflows is to have trade deficits. And if you have a trade deficit and the economy accelerates, the trade deficit will widen.

This is Economics 101. People who think trade deficits are inherently bad don't understand basic economics.

President Trump set his sights on reducing mammoth U.S. trade deficits. In the coming week, the Census Bureau will likely report the U.S. last year registered the largest trade deficit in its history.

How that happened is a lesson in the economics of imbalances. In this case, the president’s tax policies were as much in play as his trade policies. Large fiscal deficits had the side effect of enabling businesses and consumers to purchase more goods from abroad, driving down overall U.S. saving and driving up the trade imbalance.

“The evolution of the trade balance over Trump’s first two years is a good illustration of the basic principles that led most economists to predict the trade deficit would continue to widen with Trump’s policies,” said Brad Setser, a senior fellow at the Council on Foreign Relations. ...

The fiscal stimulus had two effects. First, it provided an abrupt jolt to U.S. consumption. Companies imported more to satisfy the demand. U.S. imports averaged 24% of total consumer spending between 2000 and 2016, meaning every $100 of new consumption translated to roughly $24 of imports. If U.S. factories and service providers can’t ramp up production, even more of that money might flow abroad. In 2018, imports were nearly 27% of consumption.

Second, the fiscal boost to the U.S. economy happened when much of the rest of the world was slowing. That contributed to an environment in which the Fed was raising interest rates and the dollar was strengthening. When the dollar is strong, it’s cheaper for Americans to import and more expensive for the rest of the world to buy U.S. exports, widening the trade gap.
Why Trump’s Effort to Narrow the Trade Gap Has Flopped So Far
 
Could the rising trade deficit be a consequence of a growing economy?
 
That's Trump's "fault" in that his policies have made the economy stronger.

If a country has an insufficient amount of savings to finance their consumption and investment, as America has, they have to import capital from abroad. The only way to finance capital inflows is to have trade deficits. And if you have a trade deficit and the economy accelerates, the trade deficit will widen.

This is Economics 101. People who think trade deficits are inherently bad don't understand basic economics.

President Trump set his sights on reducing mammoth U.S. trade deficits. In the coming week, the Census Bureau will likely report the U.S. last year registered the largest trade deficit in its history.

How that happened is a lesson in the economics of imbalances. In this case, the president’s tax policies were as much in play as his trade policies. Large fiscal deficits had the side effect of enabling businesses and consumers to purchase more goods from abroad, driving down overall U.S. saving and driving up the trade imbalance.

“The evolution of the trade balance over Trump’s first two years is a good illustration of the basic principles that led most economists to predict the trade deficit would continue to widen with Trump’s policies,” said Brad Setser, a senior fellow at the Council on Foreign Relations. ...

The fiscal stimulus had two effects. First, it provided an abrupt jolt to U.S. consumption. Companies imported more to satisfy the demand. U.S. imports averaged 24% of total consumer spending between 2000 and 2016, meaning every $100 of new consumption translated to roughly $24 of imports. If U.S. factories and service providers can’t ramp up production, even more of that money might flow abroad. In 2018, imports were nearly 27% of consumption.

Second, the fiscal boost to the U.S. economy happened when much of the rest of the world was slowing. That contributed to an environment in which the Fed was raising interest rates and the dollar was strengthening. When the dollar is strong, it’s cheaper for Americans to import and more expensive for the rest of the world to buy U.S. exports, widening the trade gap.
Why Trump’s Effort to Narrow the Trade Gap Has Flopped So Far
Are you figuring the short term or long term outcomes of turning a locamotive around with only some mules and shovels in tow ??

If repairing something it takes time and some hard work, so yes a vision has to be obtained, then a goal set, and then a plan enacted. Now are their those who are trying to derail that plan, and do it for nefarious reasons ?? Always.
 
... This is Economics 101. People who think trade deficits are inherently bad don't understand basic economics.
Toro,
To the extent that USA products were “crowded out” of marketplaces by foreign goods, effectively due to USA's chronic annual trade deficits, our nation's GDPs were less than otherwise.

A nation's lesser annual GDP reflects their nation's lesser than otherwise numbers of jobs and aggregate payroll amounts.

Annual trade deficits indicate the nation has purchased greater values of products than it has produced.

Rarely, if ever do credible economists refute any of these three contentions and this holds true even among those economists that may be the most ardent proponents of pure free trade.

Respectfully, Supposn
 
That's Trump's "fault" in that his policies have made the economy stronger.

If a country has an insufficient amount of savings to finance their consumption and investment, as America has, they have to import capital from abroad. The only way to finance capital inflows is to have trade deficits. And if you have a trade deficit and the economy accelerates, the trade deficit will widen.

This is Economics 101. People who think trade deficits are inherently bad don't understand basic economics.

President Trump set his sights on reducing mammoth U.S. trade deficits. In the coming week, the Census Bureau will likely report the U.S. last year registered the largest trade deficit in its history.

How that happened is a lesson in the economics of imbalances. In this case, the president’s tax policies were as much in play as his trade policies. Large fiscal deficits had the side effect of enabling businesses and consumers to purchase more goods from abroad, driving down overall U.S. saving and driving up the trade imbalance.

“The evolution of the trade balance over Trump’s first two years is a good illustration of the basic principles that led most economists to predict the trade deficit would continue to widen with Trump’s policies,” said Brad Setser, a senior fellow at the Council on Foreign Relations. ...

The fiscal stimulus had two effects. First, it provided an abrupt jolt to U.S. consumption. Companies imported more to satisfy the demand. U.S. imports averaged 24% of total consumer spending between 2000 and 2016, meaning every $100 of new consumption translated to roughly $24 of imports. If U.S. factories and service providers can’t ramp up production, even more of that money might flow abroad. In 2018, imports were nearly 27% of consumption.

Second, the fiscal boost to the U.S. economy happened when much of the rest of the world was slowing. That contributed to an environment in which the Fed was raising interest rates and the dollar was strengthening. When the dollar is strong, it’s cheaper for Americans to import and more expensive for the rest of the world to buy U.S. exports, widening the trade gap.
Why Trump’s Effort to Narrow the Trade Gap Has Flopped So Far
But trump tells us deficits are bad. He doesn’t know basic economics? Go figure.
 

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