In 2017 the US trade deficit, excluding services, was a staggering $810 billion. Yes, the US imported $810 billion more than it exported. While Donald Trump’s fairly blunt attempt at rebalancing the trade deficit, using tariffs, has attracted significant criticism, does he not have a point?
Why should the US have a trade deficit?
Goods to the tune of $2.895 trillion were imported into the US in 2017 with exports well behind at $2.329 trillion. So, which countries export far more to the US than they import?
China – there is a $375 billion trade deficit between the US and China
Canada – Canadian businesses export $18 billion more of goods to the US than they import
Mexico – the US is $71 billion short on trading equilibrium
Japan – there is a $69 billion trade deficit with Japan
Germany – the US has a $65 billion trade deficit with Germany
The US is the largest economy in the world and while exports are a major part of any business sector, the US has a massive trade deficit with the rest of the world. Why should imported steel be used on US projects? Why should Far East government funded goods be allowed to undercut their US counterparts?
How has this happened?
As Donald Trump mentioned only a few days ago, the problem of the US trade deficit cannot be blamed on Barack Obama or any of the recent US presidents. This has been going on for in excess of 50 years with a trend against US businesses. It is only when the US has a more vocal and more aggressive president that the issue of the trade deficit is being addressed. If you ask any US citizen, how could they argue against a new pricing system which does not benefit US goods but simply puts them on a par with their overseas counterparts?
Aiming high to negotiate lower
There is no doubt that Donald Trump has introduced some mind-boggling tariffs on imports to the US simply as a bargaining chip. Where tariffs have increased by 50% many believe that Donald Trump would accept 25% or even less in the right environment. He may sometimes act the fool, look the fool and play up to this reputation, but Donald Trump is far from stupid.
This is a man who has a habit of coming out with the unexpected, who is willing to trample over some of his closest allies to get what he wants. At the end of the day, neither the European Union nor the rest of the world are responsible for the election of the US president. An office which should protect US interests above everything else.
Squeezing the UK
Despite the so-called “special relationship” with the UK, Theresa May is in serious danger of being left in the lurch. Hopes were high that the UK would be able to agree a trade deal with the US post Brexit but an increase in UK steel tariffs when exporting to the US is causing problems. On one hand the Prime Minister of the United Kingdom has to be seen to be fighting the U.K.’s corner but on the other she would like to nurture a long-term relationship with the US president.
It will be interesting to see how the ongoing trade talks turn out especially when you bear in mind that Donald Trump recently very publicly humiliated the Canadian president – effectively calling him a liar.