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Trump Has Increased America’s Trade Deficit — And That’s A Good Thing

The Daily Caller logo The Daily Caller 3/11/2019 Andrew Wilford
Donald Trump wearing a suit and tie: U.S. President Donald Trump and China's President Xi Jinping meet business leaders at the Great Hall of the People in Beijing, China, November 9, 2017. REUTERS/Jonathan Ernst © REUTERS/Jonathan Ernst U.S. President Donald Trump and China's President Xi Jinping meet business leaders at the Great Hall of the People in Beijing, China, November 9, 2017. REUTERS/Jonathan Ernst

Editor’s note: The opinions in this article are the author’s, as published by our content partner, and do not necessarily represent the views of MSN or Microsoft.

A core element of President Trump’s campaign was his promise to reduce the trade deficit in manufactured goods with other countries. Two years into his presidency, and several punitive tariffs later, the trade deficit still has yet to decrease. In fact, it’s reached historic highs.

The overall trade deficit has reached its highest level since 2008, but Trump campaigned largely on restoring America’s competitive advantage in the manufacturing sphere. When not factoring in the country’s trade balance in services (where the United States actually had a trade surplus), the trade balance in goods alone reached its highest level ever.

Fortunately, there’s good news for the president: trade deficits are largely a meaningless statistic. Trade deficits just mean that more American currency is exiting the country than foreign currency is coming in. However, the foreigners holding American currency have to use it somehow, and generally they do so by either investing in American businesses or buying up American government debt, both of which are good for America.

That’s why most economists agree that trade deficits don’t truly matter much. In fact, trade deficits tend to increase in tandem with GDP growth, rather than trade deficits holding growth back.

However, this should serve as a reminder of the dangers of the president’s trade policy. Despite failing to shrink the trade deficit, tariffs have imposed immense costs on everyday Americans. In fact, should tariffs on assorted Chinese goods move forward, the annual cost of tariffs on American consumers would exceed the annual cost of taxes imposed under Obamacare.

All consumers pay for the tariffs in some way, as a recent study found that American consumers bore $69 billion in added costs thanks to price increases resulting from tariffs. Yet certain industries have been hit hard as well, many of those industries that Trump promised his trade policies would help. General Motors has announced plans to cut 14,000 American jobs because of tariffs, while assistance to farmers who were hurt by trade cost $12 billion last year.

President Trump should take this news as yet another sign that his effort at tilting at the trade deficit windmill is proving fruitless (and pointless). Fortunately, there are positive signs as well. Trump has (temporarily, at least) backed off on those aforementioned Chinese tariffs as reports of an imminent trade deal with China to drop tariffs have popped up. The president would be wise to pursue more opportunities such as this to reduce barriers to trade.

Additionally, Congress should act to claw back some of its constitutional powers to oversee trade that it has increasingly passed off to the executive. Each new trade tax imposed by this administration has been implemented without congressional approval — taxes should not be foisted upon American consumers without the consent of their elected legislators.

Despite President Trump’s actions, the trade deficit continues to rise. He should take this as a sign that trade deficits are a poor indicator for the strength of the economy, which has been humming thanks to his economy policies.

Andrew Wilford (@PolicyWilford) is a policy analyst with the National Taxpayers Union Foundation, a nonprofit dedicated to fiscal policy analysis and education at all levels of government.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.

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