Trade Imbalances Are Growing, And So Is Federal Red Ink

Commentary

March 07-- Mar. 7--Donald Trump, who thinks trade deficits with other countries "hurt the economy very badly," pledged as a candidate that if he became President, "You will see a drop like you've never seen before" thanks to "fair trade, smart trade, I even like to say brilliant trade."

He's wrong about trade deficits reflecting weakness. Americans get lots of stuff in return for the money they send overseas; that's the way the world economy works.

He's even more wrong about the effects of the policies he promised would be our economic salvation -- slapping tariffs on imported goods and triggering trade wars. The U.S. just posted the largest merchandise trade deficit in its history: $891 billion. The imbalance with Trump bete noire China hit a record $419 billion. Those are figures released Wednesday by Trump's own Commerce Department.

Other studies show tariffs costing U.S. consumers tens of billions of dollars in higher prices, not to mention the $8 billion in tax dollars sent to prop up farmers hard hit by Chinese retaliation.

Even as a silly Trump obsession with trade deficits, which don't matter much, contorts U.S. economic policy, inattention to the U.S. federal deficit, which matters much more, is having serious consequences. In the wake of a rash and lopsided federal tax cut, government red ink grew 77% in the first four months of the 2019 fiscal year over the previous one, hitting $310 billion.

This is Trumponomics. It ain't pretty.

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