Imports: Tariff wars yield yawning trade gap
So far, “President Trump’s effort to narrow the trade gap has flopped,” said Josh Zumbrun in The Wall Street Journal. It’s been a year since Trump’s “trade agenda shifted into high gear.” Yet the U.S. trade deficit in goods and services for 2018 hit $621 billion, the biggest since 2008; for goods alone, it was a record $891 billion. The 2017 tax cuts may be one reason: They “juiced demand from U.S. consumers and businesses,” fueling a 7.5 percent increase in imports last year. Trump’s tariffs on $300 billion worth of goods such as washing machines and solar panels, as well as on steel and aluminum, were supposed to bring trade partners to negotiate. But they just “led countries to retaliate” with corresponding tariffs, dampening exports. And, unlike other times when the trade gap has widened, it’s not about oil, said Jeffry Bartash in MarketWatch.com. In 2008, oil imports represented 47 percent of the trade deficit, and 67 percent in 1991. But in 2018, thanks to a “shale-oil revolution,” it was just 6.1 percent. The hope used to be “that a resurgent U.S. oil industry would slash the nation’s trade deficit.” Instead, the U.S. imports more of everything else—food, heavy machinery, cars, and electronics.
The president may never celebrate a trade deficit, said Karl Smith in Bloomberg.com, but maybe he’ll learn not to hate it. The deficit is a sign of American strength, not weakness. The economy is the best it has been in a generation, and businesses are increasing their investment in plants and equipment. U.S. trading partners, however, are struggling. “Most of the major economies in Europe are on the edge of recession.” China’s economy is slowing as well. This means “foreign consumers and businesses are spending less” on U.S. products. The primary cause of the deficit, said Robert Samuelson of The Washington Post, is the strength of the dollar. It’s strong because the entire world uses it as a global currency. That feeds the demand for dollars, and makes imports cheaper for us. The only times the U.S. has run a trade surplus have been during recessions, when the world economy slowed and U.S. imports fell. If you’re really intent on achieving a trade surplus, the easiest way “would be to cause a worldwide economic collapse.”
Trump campaigned on the notion that we have a trade deficit because we made “bad deals,” said Paul Krugman in The New York Times, and his solution is “to throw up barriers to foreign products.” That’s not how trade works. Yes, the 2018 tariffs cut imports of some items. “But imports of other goods rose, while exports performed poorly.” The end result is that the deficit soared. This is “exactly what you should have expected” from the tariffs. For all the tough tariff talk, Trump didn’t accomplish his goal, said Jennifer Rubin in The Washington Post. But he did “inflict pain on farmers” and increase costs for American consumers. A recent study found that workers in Republicanleaning states were suffering the greatest losses from the tariffs that trading partners imposed on the U.S. as retaliation. Trump’s voters are the ones who’ve “absorbed the brunt of the pain” from the failed trade policy.