TRUMP’S TREMENDOUS TRADE DEFICIT.

Economists are leery of attributing personal blame on anyone for this or that macroeconomic aggregate. Non-economists aren’t so careful: If it happens on a politician’s watch, he owns it. Donald Trump has been president for 775 days now, three-quarters the length of the Kennedy presidency (somehow it seems much longer). The U.S. trade deficit, whose supposedly disgusting, disgraceful size Trump ran against in 2016, is now effectively his. He owns it. So how’s the trade deficit going? Roughly about as well as making Mexico pay for that big new wall the president is having such trouble building.

The U.S. Commerce Department reported Wednesday that in December, the country’s deficit in its trade in goods and services rose 19 per cent from November and for the year as a whole was a record US$621 billion. Removing trade in services, the goods deficit was US$891 billion, 10-per-cent higher than in 2017, and also an all-time record. Whether you actually should remove services trade in such calculations is questionable. Economists argue that doing so is a sign of “goods fetishism,” which is one fetish there’s incontrovertible evidence — i.e., his many, many comments and tweets on the issue — Mr. Trump clearly does indulge in.

The U.S. economy is currently producing around US$21 trillion of GDP a year so the deficit in goods trade is a little over four per cent a year. “Bigger than ever” is a favourite Trump phrase, although I suppose he’s reluctant to boast about what he regards as a bigger-than-ever bad thing.

Is what is now politically and historically “Trump’s trade deficit” really his fault? Partly yes, but mainly no. Partly yes because some of the reduction in U.S. exports is from China sharply reducing its purchases of several U.S. staples, including soybeans, metals and autos. Why has it done that? Mainly in retaliation against Trump’s own tariffs on China. You start a trade war, you should expect your exports to be hit. It may also be in anticipation of striking a new commercial agreement with the U.S. that will require China to raise its American purchases. What better way to prepare for a shambolic increase in purchases than to lower them temporarily — although you’ve got to guess U.S. negotiators will be wise to that sort of gaming.

It’s also interesting that car imports into the U.S. were at an all-time high in these latest numbers. Could foreign exporters be rushing to get in under the wire of the auto tariffs Mr. Trump keeps threatening to impose if Europe, in particular, doesn’t mirror U.S. tariffs? (Although not counting — never count! — America’s 25-per-cent tariff on light trucks). Of course, foreign exporters can only flood the U.S. with imports if U.S. consumers are willing to buy them. And that’s the real “problem” in all this.

When you get down to it, tariffs and other trade barriers aren’t the main influence on national trade deficits or surpluses. Rather, Trump’s main “culpability” in trade is that his cuts in taxes and regulations have the U.S. economy outperforming most of the rest of the world. Future economic historians will carefully weigh all the evidence on whether there really has been a Trump bump in economic activity, so come back in 30 years for the definitive answer. For now, however, given the slow economic growth of the Obama years and the strong growth recently, it sure looks, to those of us living through the moment, like that’s what’s going on.

But if your economy is growing faster than your trading partners’ economies, you’re going to suck in imports faster than they will. Because their imports are your exports it follows that your imports will grow faster than your exports. And when that happens, your trade deficit rises.

In brief, what’s going on with the U.S. trade deficit is mainly a result of macroeconomics, not trade policy. And what’s going on in the U.S. macroeconomy under Trump is not a bad thing, it’s a good thing. The president clearly obsesses about the trade deficit, but would he really prefer that the U.S. economy not be humming along with both low inflation and also record low unemployment rates both overall and for just about every demographic group, even those demographic groups that solidly vote Democrat?

Trump is a spinner extraordinaire, the world’s greatest practitioner of the audacity of hype. Nothing bad happens that he doesn’t have an answer for, usually a smart-ass one.

Most economists see the U.S. trade deficit as an unavoidable consequence, but also a reliable symptom, of macroeconomic success. It pretty clearly isn’t going away anytime soon. Trump needs to do what he does best: step forward and take brazen, braggadocious credit for it.

WOULD HE REALLY PREFER THAT THE U.S. ECONOMY NOT BE HUMMING?