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.