Biden Tackles Minor Corporate Abuses While Ignoring the Biggest and Most Obvious

July 11, 2021

As reported in this Reuters article, Biden has signed an executive order that tackles many corporate abuses in an effort to help American consumers. Good for him. Many of these actions have been long overdue. But he has completely ignored the one “corporate abuse” that dwarfs all others in terms of its impact on American workers. I’m talking about the trade deficit and the practice of off-shoring millions of manufacturing jobs.

To his credit, while ignoring the abuses that Biden addressed with this executive order, Trump is the only president since World War II who took the trade deficit seriously and took concrete steps to address it.

You may wonder why I focus so much attention on the trade deficit since the purpose of my book, Five Short Blasts, and the purpose of this blog, is to raise awareness of the economic consequences of overpopulation – namely, that falling per capita consumption as over-crowding worsens must inevitably drive up unemployment and poverty. And poverty kills. Ultimately, if nothing else gets us first, it will prove to be mankind’s undoing.

It’s really not that hard to understand once you understand that increasing over-crowding as the population continues to grow inevitably drives down per capita consumption and, along with it, the need for labor. People living in crowded conditions live in ever-smaller dwellings. They own little furniture and appliances because there’s no room for them. They own less clothing because of a lack of closet space. They don’t have yards and gardens, so they don’t need tools to maintain them. They don’t own cars because roads are choked with traffic and there’s no place to park. So they don’t have garages. They don’t participate in sports because there’s nowhere left to play them. They don’t engage in recreational boating because launch and dock space is all taken.

You get the idea. But what does this have to do with trade? Consider a country with a reasonable population density. Let’s say there’s 100 million people in this country. Their lifestyle resembles that of the U.S. Now suppose that they engage in free trade with another nation that is far smaller – say one tenth the size – but also has 100 million people. It’s ten times as crowded and people live in conditions like those described in the previous paragraph. For that reason, their consumption is only half that of the first country.

Through free trade, these two countries, though each is still a sovereign state with borders, behave economically as one country. The work of manufacturing the products that their combined population needs is spread evenly across the work force, but the consumption of those products isn’t. Consumption in the 2nd country remains low because of their over-crowding. The end result is that the first country has lost 25% of their manufacturing jobs and has lost even more in terms of market share. In essence, the first country has been forced to pay the price for the 2nd country’s overpopulation.

By trading freely with the 2nd country, the first country has immediately taken on the economic traits of a country twice as populated – something it would have taken decades to happen through the course of normal population growth. Worsening unemployment and poverty are the inescapable consequences of free trade with overpopulated nations. This is why my concern for the economic consequences of overpopulation has driven me to put such heavy emphasis on trade.

With all of that as a backdrop, what has Biden done to address our massive trade deficit – now an annual one trillion dollars in trade in manufactured goods? Absolutely nothing. Oh, he’s paid some lip service to wanting to help American workers and has encouraged us to “buy American.” But he’s done nothing about our trade policy and hasn’t spoken a word about our trade deficit.

As reported this past week by the Commerce Department, our trade deficit in May continued to hover at a near-record level of $71.2 billion, the 2nd worst reading ever since setting a record of $75 billion in March. In fact, in his first four full months in office for which trade data is available – February through May of this year – Biden owns the four worst monthly trade deficits ever recorded.

Our largest trade deficit is with China. Thanks to Trump’s enactment of 25% tariffs on half of all Chinese imports, however, that deficit isn’t nearly what it once was. Our annual deficit with China peaked at $418 billion in 2018. Thanks to Trump’s tariffs, that fell to $344 billion in 2019, and fell again in 2020 to $310 billion. So far this year, it’s on track to remain at that level.

Trump left Biden the perfect tool to build on that progress. In January, 2020, he got China to sign the “Phase 1” trade deal which held at bay his threat to extend his tariffs to all Chinese imports in exchange for China’s agreement to dramatically increase their imports of American goods. What’s happened? China is failing miserably in its commitments and, not only has Biden done nothing to enforce the agreement, he hasn’t even acknowledged that the Phase 1 trade deal even exists. So far, through May, China is 39% behind its commitment on manufactured products, 43% short of its goal for agricultural products, and is a whopping 78% short of it goal for energy products. They’re barely exceeding their imports in 2017 which formed the baseline for the agreement.

So far, the Biden administration makes a good show of supporting American workers but, on this most critical issue – the one that would help us the most – all we hear from the White Houe is …….. the sound of crickets.


The Biggest Covid Lesson Not Learned

June 15, 2021

The subject of the environment is a bit off-topic for me, since the focus of this blog is to warn of the economic consequences of overpopulation, leaving others to focus on the environment. But with all of the Biden administration’s renewed focus on climate change, I just can’t let this pass.

Trump called climate change a “hoax.” Is it? I don’t think so. The science is clear that certain gases like carbon dioxide and methane, just to name a couple, have a greenhouse effect, trapping heat below the atmosphere. The concentration of carbon dioxide in the atmosphere has soared over the last decades far above its historical norms. And temperatures seem to be rising. But is there a cause and effect relationship between rising CO2 levels and rising temperatures? I’m not quite so sure.

Never mentioned is the heat-island effect of larger and more densely-populated cities. The temperature in cities is always at least a couple of degrees higher than in the surrounding suburban and rural areas as cool, moist ground is replaced by hot asphalt and concrete. As our population grows, so too does the heat-island effect in big cities. Smaller cities grow into bigger cities. Small towns grow into cities, and new towns appear in once-rural areas. Heat-islands are getting bigger and new ones are appearing everywhere. How do you quantify how much of the higher temperature readings are due to the heat-island effect vs. greenhouse gases? You can’t. Nor does it matter. The effect is the same. The planet is getting hotter thanks to our growing population.

Still, I find it logical to conclude that rising greenhouse gas concentrations in the atmosphere are playing a part in rising temperatures. So what’s the solution? To arrive at a solution, you have to first understand the real cause. Emissions of greenhouse gases like CO2 is the result of human activity. The total volume of these emissions is the product of the number of humans multiplied by the average per capita emissions from their activity. Total greenhouse gas emissions can be reduced by addressing either the average per capita emissions or by reducing the number of humans, or through a combination of both approaches. If climate change caused by greenhouse gases is an existential threat to our planet as environmentalists, political leaders and business leaders claim, then the latter approach – one that addresses both factors in the equation – the number of humans and the average emissions that they produce – is absolutely critical.

At this point, let’s take a step back and digress because it’s essential, especially for younger readers who didn’t live through it, to understand some history of the environmental movement. In the ’60s and ’70s, people were fed up with pollution. Our lakes and rivers and sky were absolutely filthy. The landscape was strewn with litter along the highways and with unregulated dumps and landfills and junkyards. The environmental movement was born.

Soon, however, perhaps because of the extent of the problem and the opposition by industry to do anything about it, environmentalists became quite radical. Much of their focus turned toward overpopulation to the point where environmentalists were perceived as “anti-human,” looking upon all humans with scorn. Industry and politicians alike hated the focus on overpopulation because economic models are based upon and depend upon growth. Industry’s profit growth goals depended on population growth. People, too, hated being told that their very existence was the problem and began to hate the environmentalists. The environmental movement was in peril. At the same time, people also began to hate industry for its opposition to cleaning up the horrible mess they had created.

In the interest of survival, environmentalists, industry and politicians came together and, in an unholy alliance, came to a mutual understanding. Industry agreed to embrace the environmental movement and pursue technologies that would clean up the environment and, in return, environmentalists agreed to never again focus on the role of overpopulation. The concept of “sustainable development” was born. All sides agreed that we can be clever enough to continue growth and development while, at the same time, protecting the environment from harm. All sides embraced this new concept of “sustainable development.” Never mind that little voice inside your head telling you that “sustainable development” in a finite world is an oxymoron and is nothing more than BS. If and when it proved to be exactly that – a bunch of BS – it would be far enough down the road that it would be some later generation’s problem to deal with. Today, you are that generation.

OK, back to climate change and how to approach it. If climate change is, in fact, an existential threat to our planet, then any approach that doesn’t include some focus on stabilizing our population – worse yet, leads us to believe that, through changes in technology we can eliminate the problem while still growing our population – is clearly doomed to failure. It is, in fact, a hoax, just as Trump proclaimed.

Take the Paris Climate Accord, for instance. If you read it’s mission, you’ll find that it’s goal is not to stop climate change but to reduce it to a manageable level – a level at which “sustainable development” can continue. There you have it. “Sustainable development” has been practiced now for at least fifty years and all of our environmental problems – especially climate change – are the end results. Does the Paris Climate Accord want to end it? No. It’s main goal is to keep “sustainable development” going. And what is required of the U.S. as a member of this accord? The U.S. is required to contribute hundreds of billions of dollars to the effort. And what is that money ear-marked for? Green energy projects? No. In fact, it’s earmarked for exactly the opposite. It would be spent to develop underdeveloped countries like India using fossil fuel technology, with the rationalization that they must first be developed cheaply so that they can then afford to make the switch-over to green energy technology. Don’t believe me? I don’t blame you, but it’s true. Read the Paris Climate Accord for yourself.

Along comes the recent G7 meeting where Biden agreed to donate another $100 billion to the cause. To advance green technology? No, it’s earmarked to help poor countries cope with the effect of climate change.

Then there’s the promise that green energy will create jobs right here in the U.S. But, at every opportunity to demonstrate that that’s true, what happens? Wind turbines are imported from Denmark. Solar panels are imported from China. The new electric Ford Mustang is built in Mexico. The Chevy Bolt EV is primarily made in South Korea.

Frankly, the entire environmental movement has devolved into a hoax, one that is designed to create the illusion that our problems are under control so that unbridled population growth – fueling sales and profit and tax base growth – can continue without opposition.

Back to the title of this post. Despite all the death and hardship it has caused, the Covid pandemic has provided us with one benefit. It gave us an opportunity to see what would happen if human activity was dramatically curtailed. Some amazing things happened. The air quickly cleared. The people of Beijing, China actually saw blue sky – probably many for the first time in their lives. The sky turned bluer everywhere and plants and trees thrived in a way that hadn’t been seen in at least half a century. Greenhouse gas emissions were slashed far more than any scientists thought could possibly be achieved through green energy projects. The roads were cleared of traffic. People took to the outdoors once again – walking and biking. And people began leaving their high-rise apartments in big cities in droves, realizing for the first time just how stifling and risky living in densely-populated conditions can be. The work force was pared down to essential workers and, with federal assistance, we all got along fine. We didn’t really need to eat out so much, or need many of the trappings of modern living that make life such a rat race.

Those of us who have been around a while – long enough to remember a time when our population was half of what it is today – have seen it all before. It brought back a lot of fond memories of what life was like in those more simple, uncrowded times. Frankly – and I’ve heard others make the same observation – it was a breath of fresh air. It was a glimpse of what is possible in a less crowded world.

That lesson is clearly lost, however. No one – not environmentalists, economists, politicians or industrial leaders have dared to utter a peep to suggest a new approach – one guaranteed to resolve climate change with far less effort and expense – an approach that includes steps to stabilize our population. In fact, Biden has thrown the immigration doors wide open in an effort to grow our population even faster. China, in an effort to avoid any decline in its enormously bloated population, is encouraging families to have more children. So is Japan. None of them really care about climate change or any of the other overpopulation-induced maladies that threaten the planet. All they care about is putting on a show to fool you into thinking that there’s actually a plan.

I have warned for a long time that unbridled population growth, through declining per capita consumption and worsening unemployment, will push us into poverty and be our undoing. If we don’t learn to moderate our population, mother nature will do it for us and it won’t be pretty. We’ve seen Covid hit poorer, overpopuated countries the hardest and there take the biggest toll. As grim as the Covid toll has been, something else will come along and it’ll be much worse. What will it take before we finally learn this lesson? I dread to find out.


No One’s at the Wheel

May 13, 2021

As reported last week by the Commerce Department, the United States’ trade deficit in goods soared to a new monthly record in March of $91.6 billion – an annualized deficit of $1.1 trillion – led by a near-record deficit of $88.7 billion in manufactured goods. Here’s a chart of that deficit in manufactured goods dating back to 2010 when the monthly deficit was only $37 billion, an increase of 140 % in eleven years.

In 2010, the goods deficit with China accounted for half of our total goods deficit. In March of this year, that was down to 30%. Since October of 2018, the goods deficit with China has fallen by 36%. During that same time frame, the goods deficit with the rest of the world has skyrocketed by 580%. Think about that. A 580% increase with the rest of the world vs. a 36% decline in the goods deficit with China! That’s absolutely astounding!

That disparity in trade results in only 2-1/2 years demonstrates the power of tariffs in shaping global trade. The 25% tariff that Trump slapped on half of all Chinese imports in 2018 was a shot to the head – a bullet right between the eyes – for China’s ambitions to dominate global trade. Say what you will about Trump, but he was the first president since World War II to defy the free trade advocates and the World Trade Organization to enact such a bold tariff program. His only mistake was not extending the tariffs to a number of other overpopulated nations that feed on America’s economy to support their bloated labor forces.

But at least he left Biden with a powerful tool to slash the goods deficit with China even further – a proven tool that could be extended to other countries to finally restore a balance of trade. I’m talking about the “Phase 1” trade deal that Trump struck with China – a deal that would have forced them to dramatically step up their imports of American goods, or face the consequence of having that 25% tariff extended to all Chinese imports. The results were predictable. (In fact, I predicted China’s failure from the moment the deal was signed). They ended 2020 by falling short of their mututally-agreed goal by $62 billion, a full one third short of their goal. Through the first quarter of 2021, they’re on track to fall short of their 2021 goal by $127 billion.

So what has Biden done? Nothing. While expressing a desire to help American manufacturing, he’s been dead silent on the subject of our trade deficit and has never even mentioned the trade deal with China which they continue to blatantly ignore. The dashboard of America’s economy has a huge, glowing red gauge right in the middle that monitors our trade performance. The problem is that, like that Tesla in Texas that sheered in half against a tree as it rounded a curve, there’s no one at the wheel. Biden’s asleep in the passenger seat, oblivious to what’s happening in global trade and the devastation to our manufacturing economy. We’re approaching that curve and all we hear is snoring.


Driven by population density disparities, U.S. trade picture darkens again in 2020

May 6, 2021

In recent posts, we’ve examined America’s trade results in 2020 and found that, at least at the opposite ends of the spectrum, our worst trade deficits and our best trade surpluses were overwhelmingly driven by one factor alone – the population density of our trade partners. Now let’s look at the whole picture – our trade results with the entire world. If population density is such a huge factor, let’s divide the world’s nations in half and see how we did with the nations whose population densities were above and below the global median which, by the way, is 196 people per square mile. Here’s a chart that shows those results and has tracked them for the past sixteen years: https://petemurphy.files.wordpress.com/2021/05/balance-of-trade-above-below-median-pop-density-2.pdf

With the more densely populated nations of the world, the U.S. suffered a trade deficit in manufactured goods of $894 billion in 2020, blowing away the record of $842 billion set only one year earlier. With the other half of nations, the deficit was only $17 billion. That’s a huge difference. The deficit with the more densely populated nations was more than 52 times larger than the deficit with the less densely populated nations.

But wait. The theory is that disparities in population density drive our trade imbalance. So the U.S. is likely to have a deficit with any nation more densely populated than our own, and our own density is 93 people per square mile, less than half of the global median. So let’s divide the world’s nations at that level. If we do, the deficit with more densely populated nations grows to $999 billion in 2020, while our trade balance with less densely populated nations was actually a surplus of $88 billion.

Economists and free trade advocates in general claim that it’s actually low wages that drive trade imbalances. Does that claim hold water? In 2020, with the half of nations who are the poorest, the U.S. had a trade deficit of only $120 billion. With the wealthier half of nations, we had a deficit of $791 billion – almost seven times larger! Not only is the low wage theory invalid, the data shows that the relationship between wages and trade imbalance is exactly the opposite. It makes sense when you think about it. Countries who manufacture for export and maintain large trade surpluses with the U.S. grow richer. If they are sparsely populated, the trade imbalance soon equalizes when they run out of labor capacity. But if they are very densely populated, their trade surplus will persist.

It absolutely baffles me that no one else is able to make the connection between population density and trade imbalances. I’ve been tracking this data for sixteen years and, with each passing year, the effect distorts our trade imbalance even more. The manufacturing sector of our economy is being destroyed and is doing real damage to the economy as a whole. As I write this, our auto industry has been driven to its knees by its inability to provide itself with computer chips. Our dependence on imports has become an existential threat. Yet our leaders turn a blind eye. They see the enormous trade deficit and put no effort whatsoever into even understanding it, much less actually doing something about it. Our trade policy amounts to nothing more than a global welfare program, providing the world with manufacturing jobs at the expense of our own workers. It makes me sick.

Oh, it gets worse. Next we’ll look at the latest trade data released this week for the month of March.


America’s Best Trade Partners

April 30, 2021

What’s it take to make the list of America’s 20 best trade partners? “Man-for-man,” (in other words, on a “per capita” basis) buy more from America than you sell to it. That’s it.

In my previous posts, we looked at our biggest trade deficits and biggest trade surpluses in 2020 and found that the population density of our trading partner was, by far, the biggest factor in determining whether our balance of trade would be a surplus or a deficit. On the surplus side, whether or not a country was a net oil exporter was also a factor, since all oil throughout the world is priced in U.S. dollars.

In my last post on the subject, we found that our biggest trade surpluses were with either sparsely populated countries or net oil exporters. But the list included both very large and very tiny countries. So let’s factor size out of the equation and see if population density is still a factor. Let’s look at the list of our biggest per capita trade surpluses in 2020. Here’s the list: America’s best trade partners in 2020.

The population density effect isn’t as clear on this list until you look at the population density of this group of nations as a whole – 22.5 people per square mile. Compare that to the density of the group of nations on the list of our twenty worst trade deficits – 360 people per square mile. Of the twenty nations on this list, thirteen are tiny nations, most of which are oil exporters. Two nations dominate this list – Canada and Australia – huge nations, comparable in size to the United States, with population densities of eleven and nine people per square mile respectively (compared to 93 people per square mile in the U.S.). Together, they account for 31% of our total trade surplus with the nations on this list.

This is a sad list. First of all, it doesn’t take much to make this list. If I were a country and I bought one recliner chair from the U.S., I’d be right at the top of the list. Secondly, our trade surpluses with the nations on this list has fallen by almost 9% over the past ten years. With the two dominant nations on the list – Canada and Australia – our surplus has declined by 33% and 34% respectively. Compare that to the 147% increase in our deficit with the nations on the list of our top 20 worst deficits. Also, consider that Djibouti made it onto this list of our top twenty surpluses solely on the basis of U.S. foreign aid to Djibouti. They didn’t even buy stuff from us. We gave it to them.

The fact is that American manufacturing is dying. 2020 marked the 45th consecutive year of ever-increasing trade deficits. We make less and less with each passing year, are forced to buy more from foreign countries, selling them less, and we export our high-paying jobs to them, all because we’re too stupid to factor the role of population density into our trade policy and apply tariffs to the most densely populated. In his first 100 days in office, President Biden, while proclaiming his desire to help American manufacturing, hasn’t levied a single tariff. He hasn’t lifted a finger to do anything meaningful to help American manufacturing workers.

So now we’ve looked at the two extremes of the trade spectrum – our twenty worst trade deficits and our twenty best trade surpluses. But that’s only 40 nations out of the more than 200 hundred around the world. Will the population density factor still be evident in 2020 when we look at trade with the entire world? We’ll see in one of my next posts.


Who’s afraid of Biden? Certainly not China.

April 20, 2021

At least that what the trade data for February, Biden’s first full month as president, suggests.

In January of 2020, China signed a new trade deal with the U.S. – the “Phase 1” deal – committing to specific and significant increases in its imports of American goods in exchange for the U.S. delaying its application of 25% tariffs to the remaining half of Chinese goods. (The U.S. had already levied a 25% tariff on half of all Chinese imports.)

In 2020, China fell woefully short of its commitment – 31% less than the required imports of American manufactured products and 27% below its commitment for agricultural products. In February of this year, China not only failed to meet its commitments under the Phase 1 deal, it didn’t even meet the 2017 baseline in a single category – not in manufactured goods, nor agricultural goods, nor energy products, nor total goods. Already lagging its commitments in January, Its imports collapsed in February, falling by 27%. So far, year-to-date for 2021, China is now 46% behind its commitments.

Why should China live up to its trade commitments? So far, Biden hasn’t acknowledged that the trade deal even exists, never mentioning it. But he’s talked of getting tough with China in general. This is a golden opportunity to show that he means business – that he’s willing to stand up for American workers and farmers. How can any world leader take him seriously when he won’t even enforce a signed-and-sealed trade deal that has clear commitments and clear consequences for failure to meet them?

Recently, Biden called the level of gun violence in the U.S. a “national embarrassment.” You know what’s really a national embarrassment? A president who doesn’t have the courage to stand up for American workers and enforce commitments that other nations have made! (And make no mistake, Biden’s not the first such president.) To use a couple of Biden’s own favorite expressions, “C’mon, man! Do something, for God’s sake!”


Just Use Tariffs

April 16, 2021

https://www.fidelity.com/news/article/top-news/202104130705RTRSNEWSCOMBINED_KBN2C01AL-OUSBS_1

The above-linked article is an interesting case study of the challenges involved in bringing manufacturing back to the U.S. The product in question is a semiconductor – a “chip” – that is in such short supply that it has forced the shutdown of some auto production in the U.S. The Biden administration is looking at ways to break our dependence on imported semiconductors.

Oddly, the article begins with what seems to be an American manufacturer – On Semiconductor – supplying chips to to Hyundai in South Korea, perhaps because the Reuters author, Hyunjoo Jin, is herself Korean. You’d think that Reuters could find some American to write about the actual subject of the article – the challenges Biden faces in bringing chip manufacturing back to the states – but apparently they couldn’t. Maybe we first need to begin by bringing news reporting back to the U.S.? But I digress.

Never mind all that. The point of the article is the complex supply chain engaged in delivering a semiconductor chip to an auto manufacturer that could just as easily be General Motors in Detroit as Hyundai in South Korea. The author chronicles the myriad of steps that begins in Italy and makes its way through Taiwan, Singapore and China, just to name a few. So it’s not just a matter of building a chip factory here. It would require a daisy-chain of factories to turn silicon wafers into the actual semiconductor chips. So the Biden administration is faced with subsidizing a whole array of industries to entice them to move manufacturing to the U.S. It’s enough to make your head spin. The article concludes with “Simply throwing money at this does not solve the problem. It is a more complex problem.”

Moving that supply chain back to the U.S. is certainly a very complex problem. Negotiating subsidies with a dozen or more companies to entice them to make such a move would be difficult enough, not to mention expensive for American taxpayers, if that’s the approach that the government is considering. But there’s another much simpler solution – one so simple that it would require little more than the stroke of Biden’s pen. All he has to do is sign an executive order to levy tariffs on all manufactured products from the countries responsible for our twenty largest trade deficits. Each of the countries mentioned in this article as being involved in this supply chain – China, Taiwan, Singapore (a small city-state located in Malaysia) and Italy – are on that list, responsible for our largest, ninth largest, tenth largest and eleventh largest trade deficits respectively.

Here’s what would happen. Eager to mitigate the tariff, GM (for example) would soon move the final step in that process, the manufacturing of the chip, to a new plant in the U.S., perhaps as a subsidiary. Other potential suppliers like Japan, Vietnam, Mexico or others wouldn’t be viable options since they too are on the tariff list.

Next, that new GM chip-making subsidiary, eager to avoid tariffs on its supplies from Taiwan, would soon implement plans to develop a supplier in the U.S. Once established, that company in turn would soon make plans to source its silicon wafers from a new plant in the U.S. instead of from Italy.

The Biden administration, and whatever administrations succeed it, would barely have to lift a finger to make it happen and it wouldn’t cost American taxpayers one penny in higher taxes. Would it raise the price of semiconductors and, consequently, the price of new cars? Sure, but not much. A few bucks at the most. But, in terms of your purchasing power, they’d actually be cheaper when you factor in the upward pressure on wages – your wages – as the result of the demand for labor from this whole new U.S.-based semiconductor supply chain.

There are two elements of a tariff plan that would be critical to making it effective. First of all, by targeting those twenty nations that are responsible for our biggest trade deficits, the tariffs would eliminate from consideration all those grossly overpopulated nations with bloated labor forces who prey on the American economy. When Trump enacted tariffs on Chinese products, suppliers simply moved their operations to some other such country like Vietnam or Mexico. Those wouldn’t be viable options if moving there failed to eliminate the tariffs.

Secondly, the tariffs must be applied to all manufactured products from those countries. Why? Because otherwise, making our autos more expensive would put them at a disadvantage to autos imported from those countries, but not if those imported autos are subject to the same tariffs. For example, suppose that the tariff is 50%. That tariff might raise the price of an American car by 25%, let’s say. But you’d still opt for the American car if cars from Mexico, Japan, Korea, China, Italy, etc. are priced 50% higher. Now we’re not talking about just cars, but every single manufactured product you can imagine. The manufacturing of every one of them would come back to the U.S. since American-made products would then be the cheaper option for American buyers.

By the way, there’s another factor to consider here. If you’re a globalist, you may be turned off by a proposal that seems “protectionist.” But if you are a globalist, you’re probably also a person who’s concerned about the environment. In all of the talk about fossil fuels and CO2 emissions, you never, ever hear mention of the role of the global supply chain in “fueling” the problem. Did you know that the ships that transport manufactured goods back and forth across oceans and around the globe, goods that could just as easily be made locally, burn five billion barrels of oil per year? Think about that. If the Biden administration really wants to have an impact on climate change, implementing this tariff plan is probably the best place to start.


America’s Best Trade Partners

April 9, 2021

In my last couple of posts, we’ve seen that, once again, in 2020, America’s worst trade deficits, in both absolute and in per capita terms, were with very densely populated countries. There seemed to be a clear link between population density and balance of trade. If there is such a link, then we should find the opposite effect at the other end of the spectrum. We should find that our biggest trade surpluses are with more sparsely populated countries.

Here’s the data – America’s biggest trade surpluses in manufactured goods in 2020. At first glance, the population density effect doesn’t seem as clear on this list. Half of these nations are less densely populated than the U.S. Among the other half, some are actually far more densely populated. There’s something else going on here. Note that I’ve highlighted in yellow six nations that are net oil exporters. This is important because the U.S. is virtually assured of having a trade surplus in manufactured goods with oil exporters, even if the U.S. itself imports very little oil from those nations. Why? Because all oil, worldwide, is priced in U.S. dollars. When an oil exporter like Saudi Arabia, for example, sells a barrel of oil, they’re paid in U.S. dollars. The only other place where U.S. dollars can be spent is in the United States. So Saudi Arabia then has no choice but to use those dollars to purchase American goods.

There are three very densely populated nations on the list – The Netherlands, Belgium and Guatemala – that can’t be explained away as oil exporters. The first two – The Netherlands and Belgium – are tiny adjoining nations who take advantage of their geographic advantage as the only seaport on Europe’s Atlantic coast to be ports of entry for U.S. goods for much of Europe.

Strip away the above effects of the oil trade and the role of The Netherlands and Belgium as ports of entry, and the effect of population density becomes clear once again. The average population density of this list is 265 people / square mile – high, but less than half that of the nations that comprise our twenty worst deficits. Also, the average is grossly exaggerated by the presence of very tiny nations on the list. The population density of this group of twenty nations, as a composite, is only 46 people / square mile. Compare that to the composite density of the twenty nations with whom we have our worst trade deficits – 499 people / square mile, more than ten times greater.

How about economists’ claim that it’s low wages that drive trade imbalances? That theory is debunked by this list of our trade surpluses, just as it was by the list of our trade deficits. The average purchasing power parity (or “PPP”) on this list is actually about $5,000 lower the average of the nations with whom we have our worst deficits – not a big difference, but it’s actually the opposite of what the low wage theory would predict. Whether our trade partners are rich or poor has absolutely no impact on our balance of trade.

Finally, there’s data in this list that should be cause for alarm. Over the past ten years, our average surplus with these nations has shrunk by 34% while our average deficit with the twenty nations who make up our worst deficits has grown by 113%. Our manufacturing sector has been so canibalized by the densely populated nations of the world that there is increasingly little left for others to buy from us. The manufacturing sector of our economy is on the brink of collapse. This may be the greatest existential threat that our country faces. We got a taste of it during the Covid pandemic when we found ourselves at the mercy of foreign suppliers for virtually everything, including the simplest of things like face masks and gowns and more complex items like respirators. How long could we sustain ourselves in a crisis like a war when our foreign suppliers could simply cut off our supplies of virtually every manufactured product? Even as I write this our auto plants are idled by a shortage of imported semiconductors.

As we did on the deficit end of the spectrum, we’ll next look at a list of the twenty nations who, in per capita terms (man-for-man) are our best trading partners.


America’s Worst Trade Partners in 2020

April 2, 2021

In my previous post, we examined the list of America’s biggest trade deficits in 2020 and saw that most of them were with nations that are far more densely populated than the U.S. Clearly, population density was a factor, but the list included nations from around the world that were both big, like China and small, like Vitenam and Ireland just to name a couple.

Today, we’ll look at America’s balance of trade from a different perspective. Which nations, man-for-man, do the most damage to America’s economy by exporting to us more than they import from us – effectively feeding off of America’s economy at America’s expense? In other words, in per capita terms, which nations are our worst trade partners?

Here’s the list of America’s Worst Trade Partners in 2020. If you’re new to this blog, there are couple of big surprises on this list:

  1. You probably expected to see China at the head of this list. In fact, they don’t make the list at all. China ranked 22nd in 2020.
  2. At the top of the list you see Ireland and Switzerland, both of whom are more wealthy than the U.S. If low wages drive trade deficits, as we’re led to believe by economists, then how the heck did two of the world’s most wealthy nations make it to the top of this list?

To understand the reason for these surprises, take a look at the population density of these nations. Of these 20 nations, 17 are more densely populated than the U.S., which has a population density of 93 people per square mile. The average population density of these 20 nations is 526 people per square mile, more than five-and-a-half times that of the United States.

Low wages drive trade deficits? Hardly. Now look at the “purchasing power parity” (or PPP, analagous to wages) of the people of these nations. These are not poor nations. Only four of these twenty nations – Mexico, Vietnam, Thailand and Cambodia – have a PPP below $25,000, which is what the U.S. considers a poverty level for a family of four. Conversely, four of these twenty nations – Ireland, Switzerland, Denmark and Austria – are on a par with, or above, the PPP of the United States, which had a PPP of about $57,000 in 2020. The average for these 20 nations is $41,518.

Also, note that our trade deficit with 18 of these twenty nations is actually accelerating, even our deficits with the two nations at the top of the list who are wealthier than us.

In conclusion, there is a very powerful relationship between population density and the balance of trade evident in this list. Conversely, there appears to be no relationship whatsoever to wealth. This is important. Economists claim that trade deficits are driven by low wages, which is no cause for concern, as those wages will rise with time and restore a balance of trade. Thus, free trade works. But what we’ve seen in this post and the previous one is that this claim is simply not true. Free trade with densely populated nations doesn’t work because trade deficits are driven by population density and will never self-correct, no matter how high wages rise.

If trade imbalances are driven by disparities in population density between two trading partners, then we should see the opposite effect at the other end of the spectrum. We should see trade surpluses with more sparsely populated nations. We’ll take a look at that in my next post.

For an understanding of exactly how population density has such an effect on the balance of trade, read my book, Five Short Blasts, or read my series of posts begining with “Five Short Blasts” Theory Explained, Part 1.


America’s Worst Trade Deficits in 2020

March 29, 2021

Many people – perhaps most – have little understanding of the economic impact of the balance of foreign trade. The best way I can explain it is to use your own checking account as an example. If more money is drawn out of your account than the income that goes into it, then you’re steadily getting poorer and, if kept up long enough, you’ll eventually be broke. Until you reach that point, you create an illusion of prosperity by buying more than you can afford, but it’s just that – an illusion. Your day of reckoning – of financial ruin – is fast approaching.

The United States, just like every other nation, has a national account that’s very much like your checking account. Influxes of money, like income taxes, other federal taxes, tariffs on imports and the money collected from foreign entities for exported goods make us richer. Conversely, outflows are bad – like money spent by the federal government (for defense, domestic programs, etc.) and money spent on importing goods. Those make us poorer.

Therefore, our balance of trade with the rest of the world makes us either richer or poorer, depending on whether it’s a surplus or a deficit. And we’re not just talking about red numbers on some obscure balance sheet deep within the Department of Treasury. A trade deficit hits you directly in the wallet. For every $50,000 increase in the trade deficit, another American’s job is lost. If it wasn’t your job, you’re still hit in the wallet when an ever-growing number of unemployed compete for your job and put downward pressure on your wages. Do the math. Since our last balance of trade in 1975, the deficit in manufactured goods has grown by $1 trillion. Divided by $50,000, that’s a loss of 20 million high-paying manufacturing jobs. The downward pressure on wages has been enormous.

With all that said, let’s take a look at how we did in 2020. Each year I think to myself that America’s trade picture couldn’t get worse, but each year it does. The year 2020 was no different. If anything, our downward spiral accelerated. Our deficit in manufactured goods came in at $911 billion, blowing past the “old” record of $831 billion set only one year earler. Which countries were our worst trading partners? Here’s the list: America’s 20 worst trade deficits in 2020.

First of all, look at the total deficit for these twenty countries. It was $1.001 trillion. That’s more than America’s trade deficit with the entire world. In fact, our entire trade deficit is due to our deficit with only the top twelve nations on this list. Think about that. Take away those twelve nations, and the U.S. enjoys a balance of trade with the other 216 nations of the world.

Now look more closely at the list. It’s no surprise to see China at the top. They’ve been there for at least the last fifteen years. What is a surprise is that the deficit with China fell precipitously in 2020, from a record high of $416 billion in 2018. Why? Because of the 25% tariffs that the Trump administration imposed on half of all Chinese imports. It’s proof that tariffs work.

Unfortunately, those tariffs on Chinese imports also explain, at least in part, the explosive growth in the deficit with other nations, most notably Vietnam. Companies scrambled to move their manufacturing operations out of China to avoid the tariffs. Trump should have applied the tariffs to these other countries as well, leaving companies no alternative but to bring their manufacturing back to America.

Note that most of the nations on this list are actually quite wealthy, high-wage nations, on a par with the U.S. (Ireland and Switzerland are even wealthier.) This casts doubt on economists’ claim that low wages are the driving force behind trade deficits. So if low wages don’t drive trade imbalances, what does? The list includes nations both very large and very small, and nations from Europe, Asia and Central America. Is there something that these nations have in common – something that should be factored into our trade policy to return us to a balance of trade?

Indeed there is. Look at the population density of the nations on this list and note that all but one (Sweden) are more densely populated than the United States, which has a population density of 94 people per square mile. Most are far more densely populated. The average population density of the nations on this list is six times greater than the U.S. There clearly seems to be a relationship between population density and balance of trade. But why? What is it that makes people who live in more crowded conditions poor trade partners for the United States?

We need to look at this more deeply. We need to factor out other variables, like the sheer size of nations, which puts China at the top of this list with a deficit three times bigger than the next nation on the list – Mexico – which is only one tenth the size of China in terms of population. In my next post, we’ll sort the nations of the world by population density and see how their balance of trade with the U.S. stacks up.