U.S. Trade Deficit High­est Since 2008

Trillions - - Content -

In Jan­uary, the Amer­i­can trade deficit was at its high­est level since Oc­to­ber 2008, ac­cord­ing to the Com­merce De­part­ment.

The trade deficit is the gap be­tween what Amer­ica ex­ports and what it im­ports, and it has been ris­ing for the last five months.

Trump blames other na­tions for sub­si­diz­ing their in­dus­tries and dump­ing those goods on the Amer­i­can mar­ket. His so­lu­tion has been to im­pose im­port du­ties on a wide range of prod­ucts that the U.S. im­ports.

Solar pan­els were hit with a 30% tar­iff and now he wants to slap tar­iffs on wash­ing ma­chines, steel and alu­minum and many other im­ports. While the cost of wash­ers won't make a lot of dif­fer­ence, the other tar­iffs will ac­tu­ally in­crease the cost of Amer­i­can prod­ucts, make them even less com­pet­i­tive in the global mar­ket and widen the trade gap.

Higher solar panel costs means higher power bills not just for con­sumers but also for man­u­fac­tur­ers.

Higher metal prices means higher raw ma­te­rial costs for Amer­i­can man­u­fac­tur­ers.

The EU has threat­ened tit-for-tat and to im­pose its own sanc­tions on im­ports of iconic U.S. blue jeans, bour­bon and Har­ley-david­son mo­tor­cy­cles.

There are a num­ber of fun­da­men­tal rea­sons that U.S. man­u­fac­tur­ing is no longer com­pet­i­tive in the global mar­ket and im­pos­ing tar­iffs won't ad­dress any of them.

How­ever, im­pos­ing tar­iffs may boost the short-term quar­terly prof­its of a few large man­u­fac­tur­ers who have paid for a trade pol­icy that fa­vors them. With the cor­po­rate tax cuts and a profit bub­ble, many ex­ec­u­tives may see a sub­stan­tial re­turn on their trib­utes to Trump, for at least the next few quar­ters, which is about as far as any of them seem to plan for.

The good news for Amer­ica is that it had a $19.9 bil­lion trade sur­plus in ser­vices such as ed­u­ca­tion and bank­ing. Wall Street still rules and much of the world still be­lieves that a diploma from an Amer­i­can univer­sity will en­sure a bet­ter job at home.

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