Trade Deficit with S. Korea Worsening

In March of this year, the trade deal that President Obama negotiated with South Korea went into effect.  The president hailed it as a big win for American workers.  Because South Korea is 15 times more densely populated than the U.S., I predicted that the results would be just the opposite – that our trade deficit with South Korea would worsen substantially. 

Two months ago, I reported that during the first four months since the deal went into effect, our trade deficit with S. Korea did, in fact, worsen by 18% compared to the same four month period in 2011.

Now, six months into the trade deal, the deficit has worsened by 31.6% compared to the same 6-month period in 2011.  (During that same time frame, our overall trade deficit worsened by only 0.3%.) 

Thanks to the president’s free trade deal with S. Korea, our trade deficit with that nation is getting worse fast.  Imagine what will happen in 4-1/2 years when the small tariffs that still remain on S. Korean cars are lifted in accordance with the agreement. 

The point is that, when one understands the role that the inverse relationship between population density and per capita consumption plays in driving trade imbalances – and just how dominant and consistent that role is, it’s easy to predict the outcome of almost any given free trade deal.  It was easy to predict that this deal would yield exactly the same results that we experience when dealing with almost every other badly overpopulated nation. 

 

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