Congratulations are in order for “President T“.
Under the careful tutelage of Donald Trump – shrinker of deficits extraordinaire -America’s trade gap exploded to $621 billion in 2018, the widest in a decade.
That means that under “Tariff Man”, America’s trade gap has surged by $119 billion (it sat at $502 billion in 2016).
In December, the deficit widened to $59.8 billion. That too is the highest in a decade. Exports in the final month of last year plunged 1.9% MoM, the biggest drop since early 2016.
If you run through the Commerce Department’s Wednesday report, it is chock-full of figures and statistics that quite clearly suggest Trump was mistaken to assert that his policies would swiftly lead to more “winning” on trade.
For instance, the merchandise trade deficit with China ballooned to a record $419.2 billion last year – a record. America’s goods deficit with the world widened to a record $891 billion, up $140 billion since Trump took office.
And it just goes on and on (and on). The merchandise gap with the EU notched a new record as well, for example.
This is indicative of what happens when someone who lacks any semblance of foresight is allowed to make important decisions. Trump’s presidency is replete with examples of policy choices backfiring thanks in large part to his penchant for shooting from the hip.
He does not understand global trade and as little as he knows about international commerce, he knows even less about what tariffs actually are (i.e., a tax on domestic businesses and consumers). And yet he habitually doubles down, with the most absurd example being his infamous “Tariff Man” moniker.
According to Trump’s own account (as delivered in November during an interview with the Washington Post), his “gut” tells him “more sometimes than anybody else’s brain can”. To be sure, his “gut” is large, but very much contrary to his own assessment, his brain is not, and because he won’t listen to what anyone else’s brain tells him, he’s inclined to trust his childlike instincts which tell him that shrinking trade deficits is as simple as slapping tariffs on America’s trade partners. After all, “trade wars are good, and easy to win” – to quote Trump.
Subjugating all other considerations to one’s instincts is an inherently perilous way to go about making policy for anyone. For Trump, it’s a sure fire way to embarrass himself and, in the process, the country he runs.
It didn’t take a “stable genius” to know that if you threaten to slap tariffs on key imports from China, importers would then scramble to get out ahead of those duties. Similarly, you didn’t have to be an economist to predict that Beijing’s retaliatory tariffs would end up hurting exports. Further, you didn’t need a PhD to understand that setting out to rewrite the rules of global trade and commerce after decades of globalization and supply chain integration would likely imperil global growth, thereby hurting demand for the goods America produces.
Literally all of that is common sense. But Trump lacks common sense. And if you’re going to be guided by your “gut”, there are only two things that stand between you and bad decisions: common sense and mere happenstance.
Of course the irony in all of this is that trade is not a “game” that can be “won”. Nobody “wins” a trade war and even if you could conjure some metric that might constitute “victory”, the trade deficit is not that measure.
As Janet Yellen put it last month while opining on the extent to which Trump lacks a basic understanding of macroeconomics, “I think almost any economist would tell you that there’s no real meaning to bilateral trade deficits, and it’s not an appropriate objective of policy.”
Thank God for that – because if we’re going by trade deficits, America didn’t do too much “winning” in 2018.