OK, I know it’s not reasonable to expect anything different. After all, Trump hasn’t yet had a chance to implement new trade policies that would have any meaningful impact on our trade results. What he has done is meet with some leaders of nations who are among the worst offenders in terms of their trade surplus with the U.S.: Mexico, Japan and Germany, most notably. He meets with Chinese president Xi Jinping in a couple of days. Reportedly, he hasn’t pulled any punches so far in expressing his displeasure with the trade deficit and has vowed to take tough action (like a “border tax”) to change the situation. So, one thing we can say about the early evidence provided by the February trade results is that tough talk has absolutely no effect on trade results. (As if the trade results of past administrations aren’t sufficient evidence.)
In February, the deficit dipped slightly. Here’s a chart of the deficit in manufactured goods: Manf’d Goods Balance of Trade. As you can see, though the deficit dipped slightly from January, it remains stuck in the $55-62 billion range it’s been in for two years.
As time goes on, I grow more nervous that Trump will cop out on the trade issue just as Obama did, as more and more meetings with world leaders and business leaders try to convince him of the intangible, unquantifiable benefits of free trade. It worked on Obama. Hopefully, they’ll find Trump a tougher nut to crack. Time will tell. If there is no border tax in Trump’s tax overhaul plan, we’ll know that he caved to the pressure. We’re watching, President Trump. You can kiss your supporters goodbye if you don’t come through on this campaign promise.