30 Mar 2024

Biden’s Bloodbath: The $1 Trillion Trade Deficit With The World Has Never Been Worse

Robert Romano (below) means well but he is exaggerating the trade problem.  The deficit itself is not a big problem. It simply means that foreigners are accepting greenbacks in return for real goods  -- such as cars and avocados.   It costs about nothing to print greenbacks so America is getting a very good deal out of it

But there is a problem if the situation affects American jobs.  But that is not an immediate problem.  Unemployment at the moment is very low and just about anyone who wants a job can get one.

The real problem is strategic.  Does America want to lose the abiity to make a lot of things?  Is it, for instance, wise for  America to stop making cars?  Is the immediate capacity to make cars important to Americans strategicaly?  

It was in WWII.  Thanks to a Mr H. Ford, America had a huge range of automobile factories for their mass market in cars and those factories could easily be switched to making military aircraft.  Automobile motors and aircraft motors were basically the same.  By comparison, Germany made some nice cars but only for their elites and Toyota was making bicycles

But it is different today.  Car factories could be switched from making cars to making armoured personnel carriers and maybe tanks but that is not going to win any wars.  The Ukraine has shown us that.  They have completely wiped out Russia's tanks with just a few relatively cheap drones and missiles.  They have even decimated the Russian navy and airforce,

So the stretegic argument for trade barriers has never been weaker.  What will win wars now is smart technology.  We are back to foot soldiering so what we can do to protect and equip our troops  is the issue. And that requires brains not manufacturing.  If America was exporting its Jews there might be a problem but there is not much sign of that.  They certainly would not want to go to Russia and Chinese is too hard to learn.  And we know about Israel at the moment.

But there can be  real sociological problems from trade at times.  If China wiped out the American automobile indistry with its cheaper cars, that could throw whole communities out of a job, with recovery from that being slow and difficult.  And that is what Trump is talking about.  He protected American steel manufacture for similar reasons when he was  President.  So using trade barriers to slow down social change is entirely legitimate where the change looks like being very disruptive.

“Now, if I don't get elected, it's going be a bloodbath for the whole — that's going to bet the least of it — it's going be a bloodbath for the country. That'll be the least of it.”

That was former President Donald Trump at a campaign stop in Dayton, Ohio on March 16, describing the impact of Chinese dumping cars into U.S. markets via Mexican manufacturing plants.

Trump said he would not allow China to enter the U.S. auto industry and to attempt to take advantage of the U.S., Mexico and Canada (USMCA) trade agreement, “They think that they're going to sell those cars into the United States with no tax at the border. Let me tell you something to China. If you're listening President Xi, and you and I are friends, but he understands the way I deal: Those big monster car manufacturing plants that you're building in Mexico right now, and you think you're going to get that, you're going to not hire Americans and you're going to sell the cars to us — no.”

Instead, Trump promised to put a 100 percent tariff on any Chinese cars: “We're going to put a 100 percent tariff on every single car that comes across the line, and you're not going to be able to sell those guys, if I get elected!”

Trump then warned that if he wasn’t elected, it would be a “bloodbath” on trade. He’s not wrong.

In fact, the U.S. trade in goods deficit with the world has never been greater according to U.S. Census data, ballooning to $1.07 trillion in 2021, $1.18 trillion in 2022 and $1.063 trillion in 2023, much of which can be attributed to the higher rates of inflation experienced after close to $7 trillion was printed, borrowed and spent into existence during and after the 2020 Covid pandemic.

As a result, the cost of everything including cars, apparel, oil and other goods and commodities imported has increased, widening the trade gap even as U.S. exports similarly increased in prices. And it came even as the trade deficit with China sank to $279 billion in 2023 after big spikes to $352.8 billion in 2021 and $382.3 billion in 2022 amid slower growth there and an overall drop in exports by China worldwide in 2023.

For comparison, the trade deficit with the world was $792.4 billion in 2017, $870.4 billion in 2018, $845.8. billion in 2019 and $901.5 billion in 2020. And with China it was $375.2 billion in 2017, $418.2 billion 2018, $342.6 billion in 2019 and $307.96 billion in 2020.

While in office, Trump had raised the tariff level on imports from China to 30 percent for goods and 15 percent for the other basket of goods, levels that Biden has not reduced, more or less leaving the Trump trade policy with China in effect. Now, Trump warns China is trying to get around those tariffs by manufacturing in Mexico instead.

In fact, Mexico is one of the main drivers of the trade deficit increasing in recent years according to U.S. Census data, going from $105 billion in 2021, to $130.5 billion in 2022, to $152.3 billion in 2023. For comparison, it was $69 billion in 2017, $77.7 billion in 2018, $99.4 billion in 2019 and $110.9 billion in 2020.

Overall, imports from Mexico have increased from $312 billion in 2017 to $475 billion 2023, a record.

And he warns it could be a “bloodbath” economically if Chinese capital into Mexico is not averted. Naturally, Biden seized on his opponent’s colorful language rather than talk about trade policy, with Biden campaign spokesperson James Singer stating the trade commentary had something to do with “political violence”: “This is who Donald Trump is: a loser who gets beat by over 7 million votes and then instead of appealing to a wider mainstream audience doubles down on his threats of political violence.”

Are we even having the same conversation in this country anymore? When Ross Perot warned of a “giant sucking sound” from Mexico in 1992, he did not mean that there was a physical, giant vacuum cleaner being set up on the border by Mexico. He was talking figuratively about jobs that would go to Mexico in the wake of the then-North American Free Trade Agreement (NAFTA) that was being proposed.

Something that Trump is warning will get worse if China is allowed to set up manufacturing within the USMCA trade zone, noting that additional tariffs will be needed as China adapts to the stronger trade posture the U.S. set up after Trump was elected in the first place in 2016, promising to get tough on trade.

It might suit Trump just fine for Biden to ignore the trade issue, as Democrats did in 2016 as they pushed the Trans-Pacific Partnership that Trump rejected, with the only figurative bloodbath that might occur being at the polls when the American people vote in November.

Robert Romano is the Vice President of Public Policy at Americans for Limited G

https://dailytorch.com/2024/03/bidens-bloodbath-the-1-trillion-trade-deficit-with-the-world-has-never-been-worse

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