Making America’s Trade Deficit Great Again
This is what happens when you run highly expansionary fiscal policies, something Peter Navarro would know if he’d taken EC101:
The US monthly trade deficit hit its highest level since 2008 in July as the country continued to import more than it exports, in a blow to Donald Trump’s promise during the 2016 election campaign to reduce that figure.
The US’s trade deficit in goods and services grew 18.9 per cent month-on-month to $63.6bn, its highest since July 2008, according to US government data. The country’s goods deficit of $80.9bn, was the highest on record.
Of course in July 2008 the deficit was bloated by $147/barrel imported oil, something that’s not true today.
This is what happens when you allow economic policy to be made by fools and knaves. Expect much more of this in the next 4 years.
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4. September 2020 at 10:18
No, even if he had taken Econ 101 he wouldn’t have got a passing grade. (What’s that you say? He has a PhD from Harvard? My mistake!)
4. September 2020 at 15:52
In a world of globalized capital markets and in which comparative advantage is almost always the result of government intervention and policies, trade policy becomes a fascinating topic that has evolved past orthodox macroeconomic theologies.
Even beyond that, nation after nation is re-appraising the advisabilty of concentration of supply chains in any particular nation.
Even beyond that, would not the world be better off if Indian supply chains could rival China’s?
Reliance Industries and Google have announced multibillion-dollar plans to produce smartphones in India at lower cost than what is presently on the market. Samsung has already located the world’s largest smartphone factory in India.
Indian government policy has played a role in these developments.
4. September 2020 at 17:45
OT, but in the blog ballpark, an amusing headlines from Fox Business:
“The Fed concedes that Trump was right all along”
4. September 2020 at 22:07
Ben, Trump was right in 2016 when he said interest rates were too low? I think you are confused—once again.
5. September 2020 at 01:12
Dr. Sumner makes a confusing claim: “This is what happens when you allow economic policy to be made by fools and knaves. Expect much more of this in the next 4 years.” – what? Is Sumner calling for a Trump win when all polls indicate the opposite? Who is not following logic and numbers now?
Bonus trivia: Ben Cole is the future. He’s a MMT advocate before it became popular. He spotted a Bulletin of Atomic Scientists article that pointed out Wuhan’s WIV was experimenting prior to 2020 with Covid-19 type viruses that are signature-free and traceless (big news, meaning the Kristen Andersen opinion that C-19 is natural due to the lack of common lab recombinant DNA signatures and traces is wrong). He’s also a critic of Sumner. That’s three for three! Not to mention a Thai farmer, I can relate to that (farming in GR, PH myself; we’re building a tilapia fish farm now in PH).
5. September 2020 at 03:20
“Of course in July 2008 the deficit was bloated by $147/barrel imported oil, something that’s not true today.”
Well, true, the US now being, I think, a net exporter, so $147 oil would close that deficit nicely.
Not that that changes the basic truth up top of course.
5. September 2020 at 04:33
Paradox: Trump is considered a FOB (friend of business). Why, if Trump’s economic policies ($1 trillion a year deficits before the public health crisis) are causing a fall in exports and an increase in imports? Can you say tax cut. Navarro is not alone: the business leaders in America are as stupid as Navarro. Trump (Navarro) gave business a bone without any meat on it and business was satisfied. Huge deficits require a “strong” dollar to fund them. As for Navarro and import restrictions, did Navarro not know that many of the goods imported from China are intermediate goods, which are used by US manufacturers to make finished goods. Did Navarro believe he was promoting US industry by taking away the intermediate goods on which said industry relies? He knows, it’s just that Navarro, like the rest of the Trump toadies, does what Trump demands. Trump has an excuse: he’s an ignoramus. Navarro doesn’t.
5. September 2020 at 04:51
Throughout Navarro’s trade negotiations with China Navarro has insisted that the U.S. be given a veto power over China’s fiscal policy. China, being a sovereign nation, reacted the way one would expect: not no, but Hell no. Which raises the question: if China’s fiscal policy is such a threat to the U.S., why is fiscal policy in the U.S. considered a threat to itself? If fiscal policy in China is considered such an effective tool, why isn’t fiscal policy considered an effective tool in the U.S.?
I’m not ready to adopt China’s version of state capitalism, but at least let’s acknowledge reality. For all the Chinese billionaires, China is still at bottom a communist nation, which means political power is used in large part to build the economy in a way that benefits the masses. Can the U.S. make the same claim, or is political power in the U.S. used to benefit the wealthy who support the politicians who control policy? For all the corruption that supposedly exists in China, does the level of corruption even come close to the level of corruption in the U.S.?
5. September 2020 at 07:14
Dr. Ray Lopez–
Yeah, I just dug out a hole for tilapia, but now I am thinking catfish.
BTW, did you know you are supposed to lime the pond? I never knew this. Had a water hole at my old place for eight years. Add NPK too, although you can just wee-wee into the water also for that (ha-ha, but maybe if all your relatives join in, it would be enough).
Note to Scott Sumner:
This is what I said: “OT, but in the blog ballpark, an amusing headlines from Fox Business:
“The Fed concedes that Trump was right all along”
—–
This is what you said:
“Ben, Trump was right in 2016 when he said interest rates were too low? I think you are confused—once again.”
—–
I just quoted a headline from Fox. I said nothing about right or wrong or a timeline.
Trump is a lulu. Maybe Biden will be better.
Boy, Biden is getting a pass on China though? Beijing is arresting Hong Kong legislators, publishers, activists. Started a border war against India. Has occupied Tibet, eying who knows what on Taiwan. Imprisoning millions of Tibetans.
Granted, this is a substance-free, policy-free, issue-free US presidential campaign on both sides. But does Biden have any detectable policy at all regarding China?
Pompeo is heavy-handed, sometimes bombastic, melodramatic, but mostly right on China.
I sure hope China mends its ways.
5. September 2020 at 07:53
Tim, I believe we produce about 15 million barrels a day and consume about 20 million, at least before Covid.
Ben, Next time you quote a Fox headline with which you (supposedly) disagree, please let us know.
5. September 2020 at 08:40
The current trade deficit with China, along with the fact we stopped hemorrhaging manufacturing jobs in 2010, is evidence that the loss of manufacturing jobs from 2001-2009 was a product of high energy prices in America…and fracking is the reason for the increase manufacturing jobs. So not only was oil at $147 barrel in 2008 but Tillerson was predicting America was about to become an LNG importer at that time!?! The fact we haven’t had a boom in manufacturing jobs to go along with cheap natural gas is because of automation. Does a Trump construction site require the same number of workers now as it did in 1980?? With respect to steel the mini mill is what disrupted that market around 1980. With respect to coal it was mining in Wyoming instead of WV. So we have very obvious developments that we can point to to show why certain industries need far fewer workers today that 40 years ago and why wouldn’t the same go for manufacturing??
5. September 2020 at 16:17
This should warm the cockles of the Disney heart:
2020 Democratic Party Platform: “Democrats will pursue this (China) strategy without resorting to self-defeating, unilateral tariff wars.”
The NBA (No Balls Association) foreign policy on tap?
5. September 2020 at 20:39
Note to Scott Sumner:
I was under the impression that headlines at Fox, CNN and MSNBC are written first, and then reporters write copy fit to suit.
6. September 2020 at 06:11
To be effectively competitive in foreign markets, requires that we sell lower unit costs and higher quality products. This means concentrating on production, innovation, and product quality. It means giving workers a financial stake in increased productivity (share in profits, etc.).
The recent fall in our exchange rate will not correct our trade deficit problem. The only solution is to sell higher quantities of higher quality, and lower unit costs of production, relative to our trading partners
6. September 2020 at 08:28
Ben, When you are in a hole, stop digging.
6. September 2020 at 13:08
The trade deficit is not a problem per se, only a symptom of a lack of national savings that is only partly the fault of the full employment deficit.
7. September 2020 at 04:47
“Tim, I believe we produce about 15 million barrels a day and consume about 20 million, at least before Covid.”
Looking it up you’re right. Down from a net import of 10 million a day in 2008.
I thought it had gone further but it hasn’t…..
“I was under the impression that headlines at Fox, CNN and MSNBC are written first, and then reporters write copy fit to suit.”
7. September 2020 at 05:30
Tim, Yeah, I keep seeing articles suggesting we are now self sufficient, but (unless I’m mistaken) the data doesn’t really show that.