Deficits show trade ‘win’ simply wishful thinking

In yet another display of his ability to elasticize the truth, US President Donald Trump claimed in a tweet on Saturday: “Tariffs are working far better than anyone ever anticipated. China market has dropped 27 percent in last four months.” Yes, China’s stock market has been performing poorly, but that was the case long before his administration launched its tariff attack on China’s imports. Analysts have attributed the decline to factors ranging from the government’s efforts at deleveraging to corporate debt build-up. Fears that a trade war might erupt with the United States have exacerbated the nervousness of investors, but to cite the announced tariffs as a direct cause of China’s bearish market — as Trump has done, with inflated figures — is to oversimplify things.

And certainly the loss in China’s equity market is by no means gain for the US, the tariff shakedown his administration has launched will not make the US “much richer than it is today”, as Trump claimed in another tweet.

Rather than a reduction in the US trade deficit, the most recent data belie Trump’s claim that “tariffs are working big time”, as they indicate that the deficit jumped 7.3 percent in June and it is on track to hit a 10-year high. The deficit climbed $3 billion to $46.3 billion in June, which was the first increase in four months, the US Commerce Department reported on Friday.

And the US bilateral trade deficits have expanded with China, the European Union, Canada and Mexico, all of which have been targeted with aggressive tariffs by the Trump administration.

Certainly, his claim of victory over China in the current trade battle, and remarks such as China is “doing poorly against us” and “we are winning” are nothing more than wishful thinking and aimed at covering up the harm his administration’s attack on Chinese trade is doing to the US economy.

However, given that Trump revealed in one of his tweets that the US and China are talking, it might be he is laying the groundwork for selling a deal to the US public as victory.

For in all the sermons that are preached by his tweets, there is blame, condemnation or other manipulating opinion, which unaccompanied by justification seems merely to the purpose of self-gratification.

That the talks do produce a deal is to be hoped for, since the US administration seems to be otherwise underestimating China’s resolve not to surrender to its tariff-slinging intimidation and the longer the trade frictions continue, the more risk there is of a fullon and damaging trade war erupting.