Donald Trump, a graduate of the Wharton School of Business, doesn’t have a very good grasp of economics.
He thinks trade deficits are a bad thing.
A trade deficit, in a nutshell, is caused when a country imports more goods and services than it exports. Trump believes that countries we trade with have an obligation to purchase our exports, in similar volume, even if they don’t need them or can’t afford them. Because, in his view, that’s what trade partners do.
The huge hole in the President’s line of thinking is the gap in wealth and, hence, consumerism between the United States and all of its potential trading partners. America is BY FAR the largest consumer of goods and services among nations on earth. We buy a lot of stuff, and our consumers are looking for value.
Our country is naturally going to run a trade deficit with every other country…because we’re richer. We should be happy that this is so; virtually every other nation on earth would gladly change places with us and endure trade deficits. They’d like to experience our standard of living.
The actual pebble in the President’s shoe is the fact that Americans are buying importing goods that used to be produced right here in the good old U.S.A. He wants to return us to the Good Old Days. You know, “Buy American!”
The problem with that goal is that labor is too expensive here to compete with foreign manufacturers from Third World countries. Also, safety and environmental regulations in the United States are more stringent than overseas, because our citizens demand safety and a clean environment. As a result of labor and regulation costs, many manufacturers have “off-shored” their plants, so that they can produce competitively-priced goods. It’s called capitalism something that Republicans supposedly endorse. President Trump is said to believe in it.
American consumers have gotten used to purchasing quality goods from Asia and Latin America at low prices. They are not going to want to pay significantly more for the same product produced in America.
(This is why, by the way, our President and his daughter, Ivanka, have their Trump brand ties and shoes manufactured in Asia…so that they can sell them in America for less. If the Trumps really believed in the “Buy American!” concept, wouldn’t they have their apparel items made in the U.S.A.?)
Because Mr. Trump campaigned on reducing trade deficits, he is trying like Hell to change global economics, and, not surprisingly, nothing is happening. Actually, America’s overall trade deficit has grown under the Trump Administration. The President hasn’t tweeted about that.
He has, however, kept busy trying to bully our erstwhile trade partners into new trade deals. His method of choice is the tariff, which is a fee attached to imports. He figures that the exporting country’s business will decline, because its products will cost more to consumers, and that: (a) it will want to sign a trading deal with America; and, (b) American businesses, which manufacture the same products, will become more competitive.
Those revised trade deals that Trump has been pushing for have not happened. That’s probably because our President changes his mind pretty much every week or so: he can’t be trusted. The Prez tore up deals with the Trans Pacific nations, and has nothing to show for it. He also blew up NAFTA (the North American trade pact with Canada and Mexico), then crafted his own version which is almost identical, and then screwed the pooch by levying tariffs on both Canada and Mexico because he was pissed off at the time. No one’s signing any trade deals with Mr. Crazy.
The tariffs are, in fact, a tax that has not been approved by Congress, which is their function. When a tariff is levied on an imported item, the exporter pays that tax to bring the product into America, and then American consumers pay a bit more for the product. So, American consumers are paying the un-voted-upon tax.
It used to be that Republicans opposed new taxes. Of course, the party used to oppose deficit spending and cozy relations with Russia, but…times change, I guess.
There was not a lot of tariff levying going on before Trump took office. That’s because there were a number of global trade pacts in place, and everyone was minding their manners. Now that the U.S. has abrogated those deals, a tariff war has ensued. Now, many of our products (exports) are subject to tariffs by the importing countries. Tit for tat.
This costs the American economy. Farmers, in particular, are suffering, because America exports a lot of agricultural products. “Corn Belt” voters were big Trump supporters in 2016, and these MAGA fans are the biggest losers in the President’s tariff war with China. So, what does the Administration do? It announces emergency subsidies for farmers…i.e. money for the crops that they won’t plant or can’t sell.
Who pays for this trade war with China? America does. Our agribusiness exporters pay tariffs to China, reducing their sales and bottom line. And, U.S. taxpayers foot the bill for the agricultural subsidies.
Interestingly, American exporters not so closely aligned with MAGA are not being offered subsidies for the costs they are bearing, and business they are losing, due to the tariff wars that Trump started. Those non-farmer exporters are not pleased.
And, Wall Street is jittery, because these unnecessary tariff wars are inflationary and can lead to a global economic slowdown.
Is this any way to run a business? It’s no wonder that Donald Trump’s business career is besmirched by numerous bankruptcies…goofy ideas that he had, deals that he entered into against sound advice, and his habit of doubling-down on his stupidity when the handwriting was on the wall.
The guy is a high-stakes gambler, typically with other people’s money, who is constantly pushing all of his chips in on his bets, hoping that he can bluff or bully his way to success.
Now that he President of the United States, he is using our money.