Grow­ing trade deficit shows US self-harm

Global Times - Weekend - - EDITORIAL -

Data re­leased by the US De­part­ment of Com­merce Thurs­day shows that be­cause of de­clin­ing ex­ports of food, in­dus­trial sup­plies and au­to­mo­tive ve­hi­cles, the coun­try’s in­ter­na­tional trade deficit ex­panded to $75.8 bil­lion in Au­gust, a record for the re­cent six months. Me­dia around the world be­lieve that US Pres­i­dent Don­ald Trump’s es­ca­lat­ing trade war is drag­ging the US econ­omy down.

The deeper deficit makes Wash­ing­ton’s rad­i­cal pol­i­cy­mak­ers feel awk­ward. Tar­iffs did not stop the in­creas­ing trade deficit and the White House is feel­ing greater pres­sure for its mis­un­der­stand­ing of the na­ture and ef­fects of tar­iffs.

Huo Jian­guo, a re­search fel­low at Chi­nese Acad­emy of In­ter­na­tional Trade and Eco­nomic Co­op­er­a­tion, told the Global Times that a stronger US dol­lar con­trib­uted to about 30 per­cent of the deficit and the US eco­nomic re­cov­ery took up about up to 40 per­cent. The trade war formed the re­main­ing 30 per­cent.

JP­Mor­gan Chase & Co trimmed their es­ti­mates for third-quar­ter GDP growth af­ter Thurs­day’s data was re­leased. The Euro­pean Cen­tral Bank also said the US would have most to lose if it started a trade war with other coun­tries, es­ti­mat­ing that US growth would be cut by more than 2 per­cent­age points.

The con­tin­u­ously deep­en­ing deficits in July and Au­gust have served as a re­buff to the rad­i­cal trade poli­cies of the US. Wash­ing­ton was seem­ingly ex­pect­ing that China couldn’t bear the pres­sure of a trade war. It was glad to see a Chi­nese stock mar­ket dip, be­liev­ing that a US vic­tory was in sight. But the US ex­perts do not know China at all.

China was al­ready pre­pared for the worst. China is march­ing to­ward a bet­ter fu­ture. Now it is the US that faces a chal­lenge. Wash­ing­ton promised the Amer­i­can peo­ple that the trade war would be an over­whelm­ing vic­tory, but that was un­re­al­is­tic.

We do not think that Wash­ing­ton will change its pol­icy be­cause of two months’ data. It will take more time, more signs of eco­nomic down­turn and more op­pos­ing views for the White House to change its at­ti­tude. But the laws of eco­nom­ics are more re­li­able. A trade war is a war of at­tri­tion in which both sides lose. As China pays its price, the US pays more.

Wash­ing­ton mis­un­der­stands the na­ture of a trade deficit. The Trump ad­min­is­tra­tion does not tell peo­ple the truth about a trade war and un­der­plays the con­se­quences.

Al­though China does not want a trade war, Bei­jing stays calm when needed and tries to min­i­mize losses. China’s at­ti­tude will stand the test of time.

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