WASHINGTON, D.C. – President Donald Trump said he won’t agree to any changes in the tariffs he’s implemented on a country unless there’s no trade deficit. An economist explains that way of dealing with trade is “unrealistic”.
A White House official told us countries like Japan, Israel and Vietnam are having leader-to-leader discussions looking to make a deal on the tariffs the US has imposed. Other economists said the formula the administration is using to implement these reciprocal tariffs does not make economic sense because the trade deficit also takes supply chains, geography, tariffs and non-tariff trade barriers into account.
“I said ‘we’re not gonna have deficits with your country,’” said the President on Sunday. “We’re not gonna do that because to me a deficit is a loss. We’re gonna have surpluses or at worst we’re gonna be breaking even.”
“This is simply unrealistic and misguided way of looking at trade,” said Alex Durante, a senior economist with the Tax Foundation. It’s a nonpartisan tax policy nonprofit.
“When I go get my clothes dry cleaned there’s essentially a trade deficit with my dry cleaner,” Durante explains. “I give them money; they provide a service for me. I’m not producing anything; I’m not giving them any goods or service in exchange. Is that a bad outcome? No. They are better at dry cleaning my clothes than I am. So I agree to give them money for a service I am unable to provide for myself. The analogue in trade is that there are certain countries at producing things than we are such as various food products that we don’t have that we’re unable to produce because we don’t have the right climate or environment.”
Durante adds there is a large trade deficit with other countries simply because they are unable to buy as many US goods as we buy from them.
“There’s just no world in which Vietnam and Cambodia- just to pick two because they have large trade deficits with them- there’s no other world in which they’ll be buying more from us than we buy from them simply because they’re poorer,” said Durante.
Durante said trade is critical for us because other countries provide labor that we don’t have here. Economists said it would take time to build manufacturing plants in the US to create those jobs. Despite that, Durante said there’s not a large crowd of Americans clamoring for those kinds of jobs.
