Marketplace, a wonderfully informative and objective newscast, opened its program last night by noting that the Trumpist contention that trade deficits are bad is “mistaken.” As I have written before, trade deficits don’t hurt jobs; they actually signal a strong dollar and a growing economy. As Marketplace said last night, a trade deficit means we’re spending lots of money and getting lots of cool stuff. Taxing Americans to prevent them buying foreign goods and services only raises costs for manufacturers and consumers and slows down the global economy. Trade deficits are not a problem.
But let’s play Trump’s game. Let’s ignore every reasonable economist and enter the fantasyland where reducing the trade deficit is good and where Trump voters cite actual data to support their positions.
[…Let’s pause here so you can pick yourself up off the floor and let your laughter subside….]
Marketplace was talking about the trade deficit last night because the Commerce Department reported yesterday that the trade deficit decreased 8.2% to $43.1 billion in November. Reuters says that’s the largest percentage drop since January and the lowest overall trade deficit since October 2016.
October 2016? Hey, I remember that time. That was back when this was still America and we had an actual President and a complete Executive Branch.
Trumpists looking at actual trade deficit data must look at that data in historical context. The St. Louis Federal Reserve helps us look with this graph of the trade deficit since 1992. (Since the trade deficit is a negative figure, the Fed graphs it downward: lower points on the graph mean larger trade deficit; November’s decrease in the trade deficit is shown as an upward change in the curve.)
So we’ve gone through a trade war, sandbagged farmers and other U.S. industries, killed jobs, sacrificed long-term market access and our reputation as a reliable trade partner, all to get back to where we were economically before Trump took office. Celebrating this “reduction” of the trade deficit feels like celebrating ratification of the CAMUS trade deal, which mostly gets us back to where we were before Trump ripped up NAFTA. Donald Trump is just taking the country around in circles, like a rubber ducky in his Maralago bathtub.
The November 2019 trade deficit is still larger than it was in 65 of the 96 glorious months of the Obama Administration. Trump’s average trade deficit so far is 21.9% higher than Obama’s eight-year average and 20.1% higher than Obama’s average over the last three years of his Administration.
|Average Trade Deficit
|Trump (2017–Nov 2019)
So even if we engage in the counterproductive argument that reducing trade deficits matters and the fantasy that data matters to Trumpists, Trumpists lose the argument. We had far less trouble under the previous Administrations and got better results.