Besides promising to build a big, beautiful wall and to lock up Hillary Clinton, Donald Trump loved to lob threats on trade on his way to the White House.
But there’s a school of thought that his protectionist America First policy is all wrong – that his executive order to identify “every form of trade abuse” by country and product to reduce the U.S. trade deficit won’t help American workers.
Some economists say that the real problem is a global imbalance caused by 10 to 20 nations that have built huge trade surpluses – and that the single most significant cause is their undervalued currencies, while the strong dollar hinders U.S. exports.
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Trump’s executive order, and a second one that focuses on uncollected import duties, could produce a few “tweetable” wins, but won’t fix the trade deficit, Robert E. Scott writes for the Economic Policy Institute.
California – the world’s sixth largest economy – has a lot of skin in the game. The state accounts for 11 percent of total U.S. exports; its total increased by $1.3 billion in February over the previous February, the fifth monthly increase in a row. California also accounts for one third of the U.S. trade deficit, though the number declined to $16.2 billion from $19.3 billion a year earlier.
Of the top 10 surplus countries, six are also among the state’s top 10 export markets, accounting for $4.4 billion in goods and services in February, according to the California Center for Jobs & the Economy.
In 2015, those six countries – China, Germany, Japan, Korea, Netherlands and Taiwan – had current account balances totaling nearly $1.3 trillion, according to Scott’s analysis.
Neither Mexico nor Canada is on the top 10 surplus list, so renegotiating the North American Free Trade Agreement may not help as much as Trump claims.
Instead, the list is topped by China, which accounted for $347 billion of the total $502 billion U.S. trade deficit last year and which is also capitalizing on Trump’s decision to spike the Trans-Pacific Partnership.
Candidate Trump taunted and attacked China for its trade practices and currency manipulation and vowed to crack down. But as president, he has apparently flip-flopped, as on so many issues.
He signed the executive orders on March 31, on the eve of meeting Chinese President Xi Jinping for the first time. After the get-together at swanky Mar-a-Lago, Trump is now saying China isn’t a currency manipulator after all.
He’s also seeking China’s help on North Korea’s nuclear weapons. “I explained to the President of China that a trade deal with the U.S. will be far better for them if they solve the North Korean problem!” he tweeted.
As if trade with China isn’t complicated enough, Trump is linking it to North Korea’s leader, who is even more erratic than he is. What could possibly go wrong?
By the numbers
California’s top 10 export markets in February, and the change from February 2016:
Source: California Center for Jobs & the Economy