Under Trump’s watch, the U.S. is on track for the highest trade deficit in 10 years

[Three_Kingdoms]

President Donald Trump pauses during a rally, Thursday, Aug. 2, 2018, at Mohegan Sun Arena at Casey Plaza in Wilkes Barre, Pa.. (Carolyn Kaster/AP)
by Heather Long August 3 Email the author


The United States trade deficit widened in June and is on track to be the biggest in a decade despite President Trump’s efforts to slash it.

For the first half of 2018, the trade deficit in goods and services hit $291.2 billion, the federal government reported Friday, which is higher than last year and puts the nation on track to have the largest annual deficit since 2008.

Trump has repeatedly promised to reduce the trade deficit during his White House tenure, but so far, it has grown under his watch.

He claims America’s “massive” trade deficit is a sign the country is getting beaten by China, Germany and others, and he blames the deficit on “very stupid” trade deals. Most economists do not view the trade deficit as a problem. They point out that a big driving factor behind the higher trade deficit this year is that U.S. consumers are buying more stuff. That’s happening largely because the U.S. economy is doing well and people feel bullish enough to shop more for goods. Trump’s tax cuts have also helped fuel the buying spree for foreign products.

“While the administration is intent on reducing the trade deficit — which it wrongly perceives to be the result of unfair trade practices — the implementation of a late-cycle fiscal stimulus package will put further upward pressure on the trade deficit in the coming months,” said Gregory Daco, head of U.S. economics at Oxford Economics, a research firm.

But Trump doesn’t see it that way. He views trade as a zero-sum game where one country is winning and the other is losing. He claims trade wars are “easy to win” and he has launched battles with numerous countries in an effort to pressure their leaders to come to the negotiating table. Trump has put tariffs on just under 4 percent of imports so far, according to The Washington Post Tariff Tracker (see below).

Trump has threatened to substantially escalate the trade war by putting tariffs up to 25 percent on another $216 billion worth of Chinese products as well as all imported cars, trucks and auto parts, which would be about another $360 billion worth of imports. If the tariffs on China are implemented in the coming weeks, it will mean that more than 12 percent of imports have Trump tariffs on them, a much larger amount that’s likely to make some prices at the store rise.

Trump stood outside the White House a week ago and declared victory that he had reduced the trade deficit in the spring, but the figure he was using to make that claim was that there was a slight reduction in the trade deficit from the first quarter of this year to the second quarter. He left out the fact that the first quarter deficit was the highest since before the financial crisis.

U.S. exports had an unusual surge this spring as other countries rushed to buy U.S. goods before tariffs went into effect. The vast majority of economists expect that rush to buy before the trade war escalated will be followed by lower than usual exports in the second half of the year. The widening trade deficit in June is a sign it’s starting to play out that way.

Economists think Trump is wrong to be so fixated on reducing the trade deficit. The only way to really cut it is for Americans stop buying so much, they argue, and they point out that the U.S. doesn’t “lose” on trade. Americans get cheaper items from abroad and the dollars to go to China and elsewhere mostly end up returning to the United States through foreign investment and purchases of U.S. Treasury bonds. Under Trump, the United States is returning to $1 trillion annual budget deficits and looking to foreign investors to help fund it.

“Economically, the trade deficit is not that big of a deal,” said Jim O’Sullivan, the chief economist at High Frequency Economics. “It’s being driven by how strong the U.S. economy is right now. ”

Despite the widening trade deficit, it still accounts for under 3 percent of the total U.S. economy, O’Sullivan notes, which is down from 5 percent before the financial crisis. Trump’s push to put tariffs on imports from China and other countries is unlikely to reduce the deficit because Americans are still likely to want to buy all of these items, so companies are likely to either pay more for the imports or else buy the items from different countries that aren’t subjected to the added tax.

Christopher Ingraham contributed to this report.

https://www.washingtonpost.com/busi...-decade/?noredirect=on&utm_term=.7a571b04ebf0




August 3, 2018 12:15 PM, EDT
US Trade Deficit Widens by $46.3 Billion in June

A container ship is unloaded at the Port of Oakland. (Ben Margot/AP)

WASHINGTON — The U.S. trade deficit widened in June for the first time in four months as exports fell and imports grew. Politically sensitive trade gaps with China, Mexico and Canada increased.

The Commerce Department said Aug. 3 that the deficit in goods and services — the gap between what the United States sells and what it buys from other countries — rose 7.3% to $46.3 billion in June from $43.2 billion in May. U.S. exports slid 0.7% to $213.8 billion; imports rose 0.6% to $260.2 billion, led by increases in medicine and crude oil.

The United States ran goods deficits in June of $33.5 billion with China, up 0.9% from May; $7.4 billion with Mexico, up 10.5%; and $2 billion with Canada, up 39.7%.

RELATED: China Plans Tariffs on $60 Billion Worth of Imports to Counter Trump

In the first half of the year, the United States has registered a trade deficit in goods and services of $291.2 billion, up 7.2% from January-June 2017.

President Donald Trump campaigned on a promise to bring down the gap, which he views as a sign of economic weakness resulting from bad trade deals and abusive behavior by U.S. trading partners such as China and Mexico.

In a flurry of activity this year, he has slapped taxes on imported steel and aluminum and on $34 billion in Chinese products. He has threatened to dramatically increase the tariffs on China and to begin taxing imported cars, trucks and auto parts. He also is attempting to renegotiate the North American Free Trade Agreement with Canada and Mexico.

But his efforts have so far failed to contain the deficit.

“The president promised a transformation of trade policy to bring down the deficit,” said Lori Wallach, director of the left-leaning Public Citizen’s Global Trade Watch. Trump, she said, “has not lived up to his promises.”

Mainstream economists blame persistent U.S. trade deficits on an economic reality that can’t be changed much by trade policy: Americans spend more than they produce, and imports fill the gap.

In June, the United States posted a surplus of $22.5 billion in the trade of services such as banking and education. But that was offset by a $68.8 billion deficit in the trade of goods.

http://www.ttnews.com/articles/us-trade-deficit-widens-463-billion-june

 

[Three_Kingdoms]

Just a while back, the same person was saying this:

Trump praises China and blames US for trade deficit
https://www.theguardian.com/world/2017/nov/09/donald-trump-china-act-faster-north-korea-threat

 

[Sugarcane]

So, Until now, it's only Japan & EU who have been chickened out

 

[Three_Kingdoms]

Trump tariffs expected to hurt US businesses in China
Targeted goods include electronics and brewing equipment made by American companies

Ben Bland and Don Weinland in Hong Kong and Tom Hancock in Guangzhou April 4, 2018

John Gonzalez was one of many China-based exporters and manufacturers waking up on Wednesday and struggling to analyse the impact of Trump administration plans for a 25 per cent tariff on more than 1,300 Chinese products.

The US citizen was surprised to find the brewing equipment he exports from eastern China on the proposed tariff list, which also includes industrial robots, nuclear energy equipment and vinyl records, making life tougher for him and big US companies that make similar products in China.

“Their business will be affected and [that] possibly will trickle down to their local workforce,” he said.

The list of affected products, which covers imports worth about $50bn last year, was released on Tuesday after an investigation by Robert Lighthizer, the US trade representative, found that China had engaged in “discriminatory” trade practices such as forced transfers of technology.

Donald Trump has set out twin goals of cutting the US’s $375bn trade deficit in goods with China and tackling what he calls the theft of intellectual property by Chinese companies.

The list of Chinese exports targeted included advanced products such as electronic components, aircraft engines and pharmaceuticals that are part of Beijing’s “Made in China 2025” plan to create a high-tech powerhouse.

The biggest sectors are industrial machinery and energy equipment, with $20bn of such products imported to the US from China last year, and electronic goods and components, with $14bn of imports. Li Feng, an industrials analyst at Zheshang Securities in Shanghai, said the tariffs would mostly hit factories making low-end components and machinery for US brands, because the US does not yet import many finished high-tech products from China.

“Some companies that rely heavily on the US market might move their factories to the US but the gross profit margin will be lower,” he said. Other companies will try to increase their exports to Europe and emerging markets, he added. China's trade tariffs - retaliation and talks.

Alex Wolf, an economist at Aberdeen Standard, warned there could be an impact along the complex supply chains that are the backbone of modern manufacturing.

“For example, Taiwanese companies that manufacture and export to China, and then China assembles and exports to the US, they will also be impacted,” he said. “Electronic goods account for 45 per cent of total US imports from China. “While a 25 per cent tariff is not that high, it will have an impact on either the US consumer, through increased product prices, or US company margins.”

Many of the proposed tariffs, which are subject to further public consultation, could hit big US companies producing in China, such as General Motors, as well as a plethora of small factories and distributors such as that of Mr Gonzalez.

The US imported just $21.8m of beer-related equipment from China last year and most of the 1,333 products on the list facing tariffs make up a tiny proportion of China’s exports to the US.

About 100 of the products listed by the US government, including satellites, rocket launchers and shotguns, were not even exported from China to the US over the past two years, according to official US data.

Economists at Morgan Stanley forecast the tariffs would have a minimal impact on the Chinese economy, denting overall exports by 0.8 percentage points and gross domestic product growth by just 0.1 percentage point.

“Given the modest impact, China’s response will probably remain measured,” they wrote in a note to clients. Alexious Lee, the head of China industrials research at CLSA, an investment bank, argued that the tariffs are part of a bargaining process between the US and China and that a full-blown trade war is unlikely.

But he believes the businesses most at risk are Chinese companies with US joint-venture partners, which risk being squeezed by both sides.

“There will probably be less US investment in China,” he said. “China will need more homegrown research and development to move up-curve.”

Mindray, a medical equipment company in Shenzhen that will be affected by the tariffs on patient monitoring devices and chemical reagents used by hospitals to test for conditions such as diabetes, said the tariffs would hurt US companies.

“US high-tech companies also do some of their manufacturing in China — it is hard to just pick out Chinese companies,” said Cheng Minghe, Mindray’s president, ahead of the tariffs announcement.

Kenneth Jarrett, president of the American Chamber of Commerce in Shanghai, said that beyond the companies directly affected, the tariffs “would have a big impact on supply chains” in sectors such as information and communications technology.

He added that while US companies wanted a tougher approach in pushing Beijing to level the industrial playing field, “they wouldn’t go so far as to say that tariffs are the answer”. “Use of tariffs has an impact in terms of the business environment in China . . . If we do plunge into a tit-for-tat situation, then companies are likely to run into unanticipated problems such as over [Chinese] approvals for investments and expansions,” he said.

“Local departments will respond to political signals that the central government is emitting and may overreact.”

Additional reporting by Emma Dunkley, Nicolle Liu and Jane Pong in Hong Kong.

https://www.ft.com/content/bdb85764-37cf-11e8-8eee-e06bde01c544

 

[litman]

so when the dollar is collapsing? i have been hearing this for the past 20 years.