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Depth | The US trade deficit is a new high, and why Trump's aggressive "trade war" can't beat the deficit?

The US Department of Commerce released data on Wednesday that the US trade deficit broke record last year, reaching $621 billion, the highest level in 10 years, and the second consecutive year since Trump took office. The 'tariff man' has become '100 million men', and the foreign media is so ridiculous. In order to get rid of the trade deficit, Trump does not hesitate to set fire to the world and provoke trade disputes. Why is the deficit getting higher and higher?

Why don't you drop the fever?

The huge trade deficit has always been a heart disease for Trump. He once said that trade imbalances are the main threat to the US economy and he vowed to solve this problem during the campaign. After taking office, he made a global attack and played a whole set of combination punches.

For example, tariffs are imposed on steel and aluminum products of the European Union, Canada, China, Russia and other economies on the grounds of national security.

Providing a strong trade dispute with China. So far, it has imposed tariffs on Chinese goods worth US$250 billion, accounting for about half of China's trade in goods exported to the United States.

It has recently announced that it will suspend GSP tariff treatment in India and Turkey. The outside world exclaimed: Trump's next trade war is the object of India?

The days in Europe and Japan are also not good, and the car tariff has been hung on the head. The US Department of Commerce has submitted an investigation report to Trump recommending a high tax on imported cars.

In addition, Trump has also abolished a series of old trade agreements, preparing for one-on-one re-signing, including the signed US-Canada agreement, and the trade agreements between the United States and Japan, the United States and Europe, the United States and South Korea.

The trade war is always good, and it is easy to win. Trump, who is a tariff man, once boasted. He also claimed that tariffs and reconsideration of catastrophic trade agreements would make the United States a net exporter.

However, the result was a slap in the face.

So, Trump's fierce drug did not allow the high-heat trade deficit to fall back?

Customs Wars Back Pot

In the eyes of economists, this pot should first be backed by a tariff war provoked by Trump himself.

Trump's tariff threat may exacerbate last year's deficit situation. Stephen Stanley, chief economist at Amherst Pierpont Securities in New York, said.

Reed College economist Kimberly Kraussin said that tariff wars make commodity prices more expensive, which could lead to both imports and exports falling. When both imports and exports decline, the trade deficit cannot be easily improved.

The analyst pointed out that the tariff war is actually the United States lifting its own feet.

One is to provoke a counteraction.

Zhou Shizhen, a senior researcher at the China-US Relations Research Center of Tsinghua University, believes that countries that have been bullied by the US trade protection bar have taken counter-measures to limit US product exports, which is the reason for the expansion of the deficit.

You hit someone else and others will kick you. For example, for the United States to impose steel and aluminum tariffs, Russia, Canada, Turkey and other countries also pay back. Another example is that China has also implemented reciprocal actions against the US tariffs.

After China's counter-measures against the United States, US agricultural exports were the hardest hit. In particular, soybeans, after China raised tariffs in July last year, US soybean exports fell 20% to $17.1 billion, the lowest level in nine years. In the face of double inventory, the US bean farmers only have two lines of tears.

Second is the US company seeking self-insurance.

The analyst pointed out that in view of the US-China trade dispute, US companies either buy Chinese goods in advance or pay close attention to exporting products to China to avoid higher tariffs in the future. Ironically, this has also become one of the reasons for the expansion of the US trade deficit last year.

The speed of life and death staged in July last year shocked the American media. Since China took reciprocal measures against the United States, from July 6 onwards, tariffs were imposed on imported products worth 34 billion U.S. dollars including soybeans. A US-owned cargo ship full of soybeans is advancing at full speed and rushing to Dalian Port of China. Before the deadline, I arrived in China to clear customs and avoid sickle.

At present, Trump has suspended taxation on China's additional $200 billion in goods. However, some importers have taken precautions and brought more goods to the United States before January of this year. This safe-haven move also widened the trade deficit.

Johns Hopkins University professor Steve Hank points out that most of Trump and his team have identified the logic that the US trade deficit is caused by unfair trade practices in other countries. The solution is to take measures such as tariffs. But in fact, the trade deficit is not caused by unfair trade in other countries, and tariffs will not change the overall trade balance of the United States. Since 1976, the United States has had a trade deficit every year. The US trade deficit is only a mirror image of the current domestic economic situation in the United States. On the one hand, as long as US domestic savings are lower than domestic investment, then the US economy must import more than exports, leading to a trade deficit. On the other hand, as long as US spending exceeds production income, excess spending will be offset by imports that exceed exports (ie, trade deficits).

Products of economic policy

Second, Trump's own economic policies may also be a major factor in the increase in trade imbalances.

Simon Lester, deputy director of the Cato Institute's Trade Policy Research Center, points out that the core of Trump's economic policy is the anachronistic Keynesian stimulus: government tax cuts and increased spending. This boosts the economy in the short term and stimulates consumption, allowing Americans to buy more goods, including imported goods. At the same time, economic growth in other parts of the world, such as the European Union, has slowed, and overseas consumers have reduced their purchases of US products.

US Department of Commerce data show that last year, the US merchandise trade deficit reached 891 billion US dollars, a record high. The Associated Press said that consumer spending contributed 70% of the power to the US economy. Economists believe that the strong demand of American consumers is enough to offset the effect of the Trump administration's tariff reduction.

Economists also pointed out that the Trump administration's fiscal policy of borrowing heavily is also a driving force for the expansion of the trade deficit. It is worth noting that while the trade deficit has soared, the US budget deficit has also surged. The data shows that the budget deficit in the first four months of US 2019 increased by 77%.

Reed College economist Kimberly Kraussing pointed out that Trump's tax cuts have reduced federal revenues, accounting for about 1% of GDP. This means that the United States has to resort to additional borrowing to increase spending and boost economic growth. Trump hopes that the urge to achieve faster growth through government debt will lead to a larger trade deficit. Because the budget deficit is due to the increase in additional borrowing by the public sector to inject into the US economy, this has led to a larger gap between government spending and income, which has also widened the trade deficit. Clausen said. Hank also said that if the government has a huge fiscal deficit, the United States will have a huge trade deficit.

Strong dollar troubles

The continued strength of the US dollar last year was also a technical factor in the weak US exports. Zhou Shizhen said. Last year, the Fed raised interest rates four times, leading to a strong dollar. From April to August last year, the US dollar appreciated by 5.5%. As the dollar strengthens, the currencies such as the euro, the yen and the pound sterling depreciate accordingly. From the economic principle, the appreciation of the local currency is conducive to imports and is not conducive to exports.

Song Guoyou, deputy director of the American Studies Center of Fudan University, believes that the reason why the US foreign trade deficit is high is that it is the marketization of the division of labor between the United States and the world economy in the era of globalization. As a result, it is not the result of unfair trade that the United States has said. Trump wants to use the power of the US government to rely on unilateralism and protectionism to exert pressure on the outside world to change this situation. It can only be counterproductive, and ultimately cannot compete against the results of marketization.

US media pointed out that in the eyes of most economists, in the long run, the trade war provoked by Trump is not good for anyone, nor does it help to reverse the trade deficit. Instead of reducing the trade deficit, tariffs will put the US economy at risk because it disrupts the operations of many US companies that rely on imported goods as a raw material for production and raises commodity prices.

Protect the true color will not change

Fantasy by tariff wars The trade deficit has been negated by the cruel reality. Some American economists shouted Trump: Please be realistic. How will Trump, who never wants to admit defeat, make a move next? Will the White House adjust its trade policy?

Zhou Shizhen believes that, first, the United States will speed up the signing of agreements with trade rivals. For example, the United States has not raised China's 200 billion US dollars of goods to 25% tariffs. China and the United States have been negotiating intensively for some time now, and now the United States needs this agreement. Next, it broke through Japan and Europe. Second, Trump will let the dollar depreciate. Trump has repeatedly pressured Fed Chairman Powell. At present, the Fed has surrendered almost in all directions. This year, it is not expected to raise interest rates any more, and the contract will be closed during the year. These measures will weaken the dollar in order to promote exports.

As to whether the White House will become more realistic and change the style of trade protectionism? In this regard, Song Guoyou expects that the Trump administration's foreign trade policy will continue its US priority. In addition to Europe, China, Japan, South Korea and other major trading countries, the United States will also expand its targets. For example, India and Turkey have become the targets of Trump's latest trade agenda.

Zhou Shizhen believes that what Trump is most concerned about now is not a deficit, but a general election next year. The core factor in determining the success or failure of the election is the economy. If the US economic growth rate in 2020 is less than 2 percentage points, Trump's re-election campaign may not be enough.

However, for the prospects of the US economy, whether the Fed, the international economic authorities, and the Wall Street consortium are not optimistic, they believe that the US economic growth will show a downward trend in the next two to three years. According to an economic policy survey released by the National Business Economic Association last month, 42% of respondents believe that the recession will occur in 2020. From the current trend, the US economy may not perform in the second half of next year, and the second half of the year will enter a critical period of election.

In response to this situation, Trump will not abandon trade protectionism, but will gradually relax some measures to avoid affecting economic growth. Zhou Shizhen said that for raw materials such as steel and aluminum, and primary products, Trump is not expected to impose tariffs. Because the US manufacturing industry relies heavily on overseas imports, if it only protects the employment of 140,000 steel workers, it will impose a 25% tariff on foreign steel products. Finally, the board can only be used in other industries that rely on steel imports. 6.51 million workers are employed. That is to lift a rock and lick your own feet, and run counter to the stimulus economy.

Zhou Shizhen also pointed out that the US release of trade data this time means that this round of trade war is tentative. In the future, the battlefield may shift from Washington to Geneva. The dispute over trade interests will shift to the rule of law. The United States will seek to revise the regulations of the World Trade Organization. In this regard, the US-Europe and Japan will be highly consistent.

Trump is reluctant to be re-elected?

During the presidential campaign in 2016, Trump pledged to raise tariffs on China, Canada and the European Union, which would reverse the US trade deficit. It seems that this promise has not been fulfilled.

Trump failed in the exam he set for himself, says House Democrat 2, Stony Hoyer.

As the United States enters the election season, the domestic campaign atmosphere is gradually warming up, and Trump is also gearing up for a second term. However, at the moment, he is in a dire situation: the Democratic Party is chasing after it, from the border wall to the Tongmen Gate, one is not letting go, and even brewing impeachment; the investigation report of Special Inspection Officer Miller will also be released, now, the latest trade The data is not good, will his road to re-election become more difficult?

The analyst pointed out that trade data may become a political weakness of Trump. The Washington Post said that trade drag on economic growth may be greater than expected. Some economists have lowered their US economic growth expectations for the first quarter of 2019, fearing that trade continues to drag.

According to the Financial Times, just as the US trade data came out, there was a sign of uneasiness in the US industrial hinterland. It seems that there is concern about the effectiveness of Trump's policy, which is Trump's iron ticket. Where.

This week, US Trade Representative Wright Heze went to Michigan to meet with members of the American Auto Workers Union, but he failed to persuade the other side to support the new North American Free Trade Agreement reached by Mecca last year. At the same time, a GM manufacturing facility in Rhodestown, northeast Ohio, was closed down, leaving Trump's arguments about economic policy bankruptcy.

However, Song Guoyou believes that whether the expansion of the trade deficit will affect Trump's re-election, it is too early to assert. Specifically, it depends on the situation this year and next. If the trade deficit continues to deteriorate and then drag on economic growth, it may have a negative impact.

Although Trump's tariff prescriptions did not cure the US trade deficit, American economists gave Trump a prescription for healing trade policy ideas – if Trump took off his 'tariff' coat With the cloak of a 'free trade fighter', the US economy will be better. Simon Lester, deputy director of the Cato Institute's Trade Policy Research Center, said.

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