Closing the Book on Obama’s Trade Policy

March 8, 2017

The U.S. trade deficit for the month of January was posted yesterday by the Bureau of Economic Analysis.  It was horrible.  President Trump took office on January 20th, but he can hardly be held responsible for any of the January results.  This is all on former President Obama.

How bad was it?  The overall trade deficit rose to its worst level in nearly five years – $48.5 billion.  At $62.1 billion, the deficit in manufactured goods just missed its all-time worst reading of $62.5 billion set in March of 2015.  As you can see from this chart, if the trend in manufactured goods continues, we’ll have a new record very soon and, without the change in trade policy promised by President Trump, it will likely get worse from there:  Manf’d Goods Balance of Trade.

Then there’s the export numbers.  In January of 2010, lacking the courage to take on the problem with imports, President Obama vowed to double exports in five years in an effort to turn the U.S. into more of an export-driven, Germany-like economy.  It never happened and never even came close.  In January of 2017 – seven years after Obama made that promise – total exports, at $192 billion – remained below the October, 2013 level.  Worse yet, exports of manufactured goods were below the level reached in September, 2011 – up only 26% from when Obama made that promise.  And that increase was due entirely to global economic recovery from the 2009 recession and had nothing to do with any real improvement in America’s export position.

So that closes the book on Obama’s trade policy, which was a total failure.  Actually, if President Trump follows through on his promise of tariffs (or border tax, or whatever you want to call it), this closes the book on a seven-decade-long experiment with free trade and globalization, begun in 1947 with the signing of the Global Agreement on Tariffs and Trade that, by any measure of its effect on the American economy, has been a complete disaster.

  • America’s trade surplus dwindled until we ran our last trade surplus in 1976.
  • 41 consecutive years of trade deficits has yielded a cumulative deficit of $14.4 trillion.  During that time, the national debt, which is closely linked to the trade deficit, grew by $19.4 trillion.  In 1976, the national debt was only $0.5 trillion.  Virtually all of our national debt is due to the cumulative trade deficit since 1976.
  • During this period, family incomes and net worth have declined, our infrastructure has crumbled, and our nation has been bankrupted.  The manufacturing sector of the economy has been gutted.  More than ten million manufacturing jobs have been lost.  The United States, once the world’s preeminent industrial power, has been reduced to a skid-row bum, begging the rest of the world to loan us money to keep us afloat.

This is all on you now, President Trump.  You own it.  You’ve promised to straighten out this mess.  America is watching and waiting.


American Millenials Far Worse Off Than Their Parents at the Same Stage in Life

January 16, 2017

http://www.usatoday.com/story/money/2017/01/13/millennials-falling-behind-boomer-parents/96530338/

An analysis of Federal Reserve data by the advocacy group “Young Invincibles,” released on Friday, finds that the millenial generation – especially white millenials – are far worse off economically than their baby-boomer parents were at the same stage in life – in 1989.  (See the above linked article.)

  • The median net worth of millenials is 56% lower.
  • Median income has fallen 21% in spite of the fact that a larger percentage of millenials (approximately 50% more) have a college education compared to baby boomers.
  • Home ownership is down by 3%.
  • Millenials are saddled with “drastically higher” student debt.

The article observes that “the analysis fits into a broader pattern of diminished opportunity.”

Looking beyond the Federal Reserve data, millenials are clearly much worse off than their parents in many other ways:

  • While most employers offered pensions in 1989, few do today.
  • The cost of health care is orders-of-magnitude higher than it was in 1989.
  • Good jobs were still fairly plentiful in 1989.  Not today.  The example cited in the article of a college-educated lady earning minimum wage making pizza isn’t a one-off.  It’s pretty typical.
  • The millenial generation is famous for depending on their parents for housing and additional support beyond that.  It’s not a matter of immaturity among millenials.  They do it out of necessity.  In 1989, no self-respecting baby boomer would be caught dead living with his/her parents.  There was no need.

None of this should come as any surprise to those who understand the consequences of the inverse relationship between population density and per capita consumption.  It’s precisely what I predicted in Five Short Blasts, which I began writing in 1993.  Since 1989, the U.S. population has grown by approximately 25%.  But, worse than that, our effective population density has exploded by 200% since 1989 by economically erasing our borders and attempting to trade freely with badly overpopulated nations who prey on our market and bring nothing in return to the trading table but bloated labor forces, hungry to take jobs from Americans.  Diminished opportunity and worsening poverty is inescapable in those circumstances.

Sadly, most millenials are oblivious to what’s been done to them through globalization, which has been slickly packaged and sold to them as some sort of utopian state where we all live in perfect harmony together, masking the underlying truth – that their economic civil rights have been trampled by the greed of global corporations who feed on population growth to stoke their bottom lines.

 

 

 


Ford Moving to Mexico; Trump Says He’ll Stop It

September 15, 2016

http://money.cnn.com/2016/09/15/news/companies/donald-trump-ford-ceo-mark-fields/index.html

The above link will take you to an interview conducted by CNN’s Poppy Harlow with Mark Fields, Ford CEO.  If you have the patience to watch it all the way through, it will be immediately followed by further discussion of Trump’s plans to raise tariffs and bring manufacturing jobs back to the U.S.

Trump has long predicted that Ford would be announcing its move to Mexico.  Fields responds that they are only moving its small car production – the Focus and the C-Max (both made at Ford’s Dearborn, MI plant) -to Mexico.  Other models will continue to be made in the U.S.

Ford actually sells six car models:  Fiesta, Focus, C-max, Fusion, Mustang and Taurus.  The Fiesta and the Fusion are already built in Mexico.  Ford’s announcement about the Focus and C-max leaves only two of its six car models that are still made in the U.S. – Mustang and Taurus.  The former is built at its Flat Rock, MI plant and the Taurus is built in Chicago.  Most of its SUVs and trucks are built in the U.S.  There’s a good reason for this.  The U.S. continues to maintain a 25% tariff on all imported light trucks.

The Transit Connect is an interesting exception.  Until 2013, Ford imported the Transit Connect, a vehicle it markets as a commercial van/truck, from Turkey, trimmed out as a passenger van.  It then strips out the passenger interior, removes the windows, and replaces them with metal panels, converting it into a commercial vehicle.  It did all of this to escape paying the 25% import tariff.  In 2013, the U.S. ordered Ford to stop this practice.  Ford still does it, but now it pays the tariff.  It “eats” the cost of the tariff.  It doesn’t pass it on to the consumer.

If elected, Trump has vowed to essentially tear up most trade deals – particularly NAFTA, and will raise tariffs to force companies to re-establish their manufacturing operations in the U.S.  In the case of Mexico, he has suggested a 35% tariff.  During the linked interview, Ms. Harlow asked Mark Shields directly whether he would still move manufacturing to Mexico if that were to happen.  Shields side-stepped the question.  But the answer is obvious.  Of course Ford would not move more production to Mexico if that were to happen.  Quite the opposite.  Production of the Fiesta and Fusion would also return.

Late in the interview, Shields cited the huge savings in labor costs for the move to Mexico, saying that it needed to be done to remain competitive in that segment of the market.  Ms. Harlow failed to follow up with the obvious question:  “So you’ll be reducing the price of the Focus once production has moved to Mexico?”  I would have loved to see him squirm and see the smirk run away from his face when he replied that the price wouldn’t change a bit.

Has any company ever cut the price of any product once its production was moved overseas?  Of course not.  They pocket the extra profit.  Which brings us to one of the arguments employed by economists (and cited in the 2nd CNN segment which starts immediately after the Mark Shields interview) that prices will rise and consumers will be forced to pay the tariffs, hurting the economy and cutting deeply into consumer spending.

That’s absolute nonsense.  Consumers don’t pay the tariffs.  The importing companies pay the tariffs.  Whether or not they elect to pass that extra cost along to the consumer is entirely up to them.  As we saw above with the Transit Connect, Ford doesn’t pass it along.  Sure, that would cut deeply into profits.  By far, the smarter alternative is to move manufacturing back to the U.S.

During the course of the interview, Ms. Harlow repeats a myth about tariffs and their role in the Great Depression.  “… the last time a big tariff was instituted in the United States back during the Great Depression, all the economists agree that it made the Great Depression worse.”  I’ve said it many times but it bears repeating here:  that’s factually false and is absolute nonsense.  First of all, no new, big tariff was implemented during the Great Depression.  The Smoot-Hawley Tariff Act of 1930 was a very slight tweaking of the  Fordney-McCumber Tariff Act of 1922, raising tariffs overall from 38.5% to 41.4%.  Following enactment of Fordney-McCumber, the economy boomed during the “roaring ’20s.”

By the time Smoot-Hawley was enacted, the Great Depression had already been underway for a year.  During the Great Depression, America’s balance of trade declined by less than $1 billion while GDP fell by $33 billion.  To blame tariffs for the Great Depression is ludicrous.  But that didn’t stop economists from doing it, eager to make a case for their new, untested theory about “free” trade.

In the CNN piece following the Mark Shields interview, CNN reports on dire warnings by economists that Mr. Trump’s tariffs would have disastrous consequences for the economy, cutting GDP by up to $1 trillion and would result in the loss of 4 million jobs.  Such claims are really puzzling, given the fact that economists know very well that a trade deficit is actually a subtraction in the calculation of GDP.  It’s impossible that bringing back manufacturing would do anything other than boost GDP dramatically.  Merely balancing trade in manufactured goods would be an $800 billion boost to the economy.  That would be a 4% jump in GDP which, not coincidentally, is what Trump has targeted for economic growth.  Any further surplus in trade in manufactured goods would boost the economy even more.  And instead of cutting 4 million jobs, it would actually create approximately 10 million jobs.

Free trade advocates claim that manufacturing jobs don’t matter any more, that most manufacturing is automated and there are few jobs there to be had.  If that’s true, then why do so many badly overpopulated nations with huge, bloated work forces cling so desperately to the manufacturing that they do for the American consumer?  Certainly, automation has improved productivity in manufacturing, but not nearly to the extent that free traders would have you believe.  Consider the production of the supposedly high-tech cell phones like the i-phone.  Their manufacture is about as low tech as you can get – thousands of people assemble the circuit boards by hand in China.

During one of the CNN segments, the reporter comments that “cars aren’t really built from scratch any more.  They’re assembled.  Those plants in Mexico will be assembling them from American-made parts.”  As if the process of assembly requires no effort, and as if cars haven’t been built that way since Henry Ford invented the assembly line.  I can tell you from personal experience, having toured the Dearborn plant where Ford builds the Focus, that it takes a lot of workers to make an assembly plant “tick.”  Watching a stack of sheet metal being turned into a finished automobile in less than 24 hours is truly awe-inspiring.  Having toured both auto assembly plants and electronics manufacturing, I can tell you that an auto assembly plant is far more “high-tech” than electronics production.

Trump’s plans to use tariffs to return manufacturing back to the U.S. is exactly what the American economy needs – and is exactly the thing that globalists fear the most.


Globalism Establishment Starts to Sweat as their Regime Begins to Crumble

July 26, 2016

These three articles appeared in the news a couple of days ago almost simultaneously in the wake of the Republican convention.

In this first article, finance ministers and central bankers from the G20 nations pledge to “share the benefits of global growth more broadly.”  The article focuses on concerns surrounding “Brexit,” Great Britain’s vote to pull out of the European Union over dissatisfaction with the EU’s open border policies and with being fleeced to prop up the economies of other EU nations.  But the article also takes note of Trump’s vow to pull out of trade agreements.  The G20 is starting to sweat.

In the 2nd article, U.S. Treasury Secretary Lew is reported as saying that it’s time to “redouble our efforts to use all of the policy tools that we have to boost shared growth.” Why is it time to do that now?  Why weren’t we doing this all along?  It’s because it’s now clear that “free trade” policy is becoming more widely opposed, with the political left now opposing the Trans Pacific Trade Partnership (TPP) and with the right going further, vowing to pull out of all existing free trade deals.  The globalist Obama administration is also starting to sweat.

And further evidence comes in this 3rd article about a meeting on Friday between President Obama and his Mexican counterpart.  Don’t be fooled.  This wasn’t just a meeting designed to stress the importance of the relationship between these two countries.  Both are beginning to sense the very real possibility that their trade regime is nearing it’s end.  I predict that, sometime between now and the election, there will be an announcement of some deal, a deal that had its genesis in this meeting, that will move some token manufacturing back from Mexico to the U.S. in an effort to blunt some of the trade anger.

I have written occasionally about cracks that were beginning to appear in globalization – like more and more economists beginning to openly question whether donor countries like the U.S. and Britain were really seeing any benefit at all from these trade agreements and whether they have been, in fact, a net drag on their economies.  The globalization story has been very much like the annual reports that emanated from the now-defunct Enron Corporation.  We were told by Enron that their business was very complicated – too complicated for analysts outside the company to understand.  As it turned out, it wasn’t really complicated.  It was a scam.  People will only buy into such scams for so long.  And so it is with globalization.  The British people could no longer take it.  Nor can Americans.

Without the support of its donor nations and the continued subservient acquiescence of its citizens, the globalization scheme is doomed.  Good riddance.

 


“Brexit” Another Failure of Economics

June 30, 2016

Why is it that all the big stuff happens while I’m on the road and unable to comment?  So it was with the “Brexit” vote last week when Britons voted to split from the European Union – the EU.  Well, better late than never.  So the following are some thoughts regarding the “Brexit” vote.

There has already been a lot of analysis of the underlying reasons for the surprising results of this vote.  They focus on three main issues:  immigration, trade, and the fact that Britain was being fleeced by the EU to the tune of about $350 million per day – only about half of which was returned to Britain in the form of “subsidies.”

The real root cause goes much deeper.  For decades, the main thrust of the United Nations has been the eradication of hunger and poverty among undeveloped nations – a noble goal.  But instead of helping such countries by fostering real, organic economic growth that begins with self-sufficiency and nurtures domestic industrialization to meet the growing wants and needs of the people, economists decided on an easier route.  They relied instead on “free” trade and population growth.

There was once a time when nations were free to strike trade deals with one another that were of mutual interest to both.  Both sides benefited.  Each gave something and each got something on terms that worked out to the best interests of both.

But faced with the challenge of elevating the fortunes of undeveloped countries, the United Nations and the World Trade Organization seized on a quick fix – the implementation of a trade regime that would tilt the playing field such that jobs and money would slide from the developed world to the undeveloped world.  “Don’t worry,” they assured the developed world.  “It’ll benefit you, too, when these nations develop into customers for your goods.”

Well, they haven’t, and now we have a system of trade where the rules are rigged in favor of one country over another – where developed countries are forced into trade relationships that are actually detrimental to them and their citizens.  This situation is now referred to as “free trade” while the previous system in which countries were free to make their own trade deals is decried as mercantilism.

The other tool in economists’ bag of tricks is population growth.  Population growth translates to GDP (gross domestic product growth), something that business loves, so the economists found ready and willing allies among global corporations, chambers of commerce and others.  None recognize that such cancerous growth actually degrades the quality of life of individuals and fuels more poverty.  The EU is no different and has seized upon immigration-driven population growth as a tool to prop up GDP.

There is just one problem with this grand scheme – democracy, and the fact that all of the ballyhooed intangible benefits of these approaches couldn’t obscure from the people the fact that they’re getting screwed.  I’ve occasionally high-lighted cracks that have been appearing in “globalization,” mostly in the form of skepticism about whether “free” trade was really any benefit at all for the donor countries or if it was actually dragging them down.  Now comes the “Brexit” vote, ripping a gaping hole in it.

Congratulations to the British people who rejected the econo-babble of the EU elites and applied common sense to their evaluation of what’s become of their country.  And it doesn’t stop with Britain.  Other EU nations who find themselves being fleeced to prop up the likes of Greece and Spain are also ready to jump ship.  In the wake of “Brexit,” EU leaders commented that, with the loss of British revenue, the EU may now be forced to raise taxes and implement even more austerity.  Smooth move, Brussels!

Speaking of dumb moves (dumb from the perspective of the globalists), how about Obama’s trip to Britain in which he chastised the “leave” supporters and threatened that the U.S. would relegate them to 3rd class status in trade negotiations if they did, in fact, leave the EU?  If any Brits were on the fence on this issue, Obama’s comments offered proof that Britain had been subjugated to the interests of the global elite.  Obama may very well be responsible for pushing Brits over the edge.  Yet another foreign policy blunder on his part (right on the heels of his disastrous trip to Japan, during which he was publicly berated by the Japanese president).  Continuing down that tangent, just yesterday he met with the Canadian and Mexican leaders in support of NAFTA, a meeting that the press hailed as “the three amigos.”  Could he possibly have made a more tone-deaf move when the nation is already fed up with illegal immigration from and job losses to Mexico?  Now Obama is known as an “amigo?”

As proof that sentiments that drove the “Brexit” vote go beyond the EU, Donald Trump has also blown a big hole in America’s one-party Republi-crat support for free trade and mindless pursuit of population growth as a crutch for a sick economy that was long ago ceded to the World Trade Organization.  The Republican elite are abandoning him in droves, but voters couldn’t care less.  They’re fed up with their leadership, just as the Brits were fed up with theirs.  America’s “Brexit” from globalization may come in November.

 

 


America’s Worst Trading Partners in 2015

May 19, 2016

It’s time for my annual ranking and analysis of America’s best and worst trading partners for 2015.  No surprise, it was another dismal year for American manufacturers, racking up the 40th consecutive year of trade deficits and setting a new record in the process – a deficit of $648 billion.  That surpasses last year’s record deficit by a whopping $109 billion.

Since the surpluses of trade with our best trade partners is overwhelmingly swamped by the deficits with our worst partners, let’s begin there.  This year I’m going to first present the list in the most basic terms – a list ranked in order of the sheer size of the deficits. Check out this list of America’s twenty worst trade partners in terms of our deficit in manufactured products:  Top 20 Deficits, 2015.

The nations at the top of this list should come as no surprise to anyone.  Trade with China dwarfs them all with a deficit of $367.5 billion – more than four times larger than our second largest deficit with Japan.  That’s not surprising when you realize that China has ten times as many people as Japan.  China actually accounts for about one fifth of the entire world’s population.  The following are some other key observations about this list:

  • Look at the population density of these nations.  The average population density is 737 people per square mile.  That’s eight times the density of the United States.  With only one exception – Sweden – every nation on this list is more densely populated than the U.S.  Most are much, much more densely populated.
  • Eight of these nations are wealthy European nations.
  • Over the past ten years, our trade deficit has worsened with 17 of these nations.  Most have worsened dramatically.  The nation with whom our balance of trade has improved the most (that is, with whom the deficit has declined the most in the past ten years) is Sweden – the only nation on the list less densely populated than the U.S.
  • Our trade deficit with Japan has actually declined by 18% over the past ten years.  Why?  Simple.  South Korea is “eating their lunch.”  Imports of South Korean cars – Hyundais and Kias, along with imports of South Korean appliances like those made by LG, Samsung and others – has cut into Japan’s market share.  Remember when President Obama signed a new trade deal with South Korea in 2012, proclaiming it a “big win for American workers?”  In three short years our trade deficit with South Korea jumped 50%.
  • Our fastest growing trade deficit is with Vietnam, growing by 440% in the last ten years.  Some may point to the fact that at $6100 per person, Vietnam has the lowest purchasing power parity of any nation on this list – only slightly better than India – and that this is the reason for the explosive growth in our trade deficit with them.  However, our second-fastest growing trade deficit is with Switzerland, a nation that is actually more wealthy (with higher wages) than the U.S.  What Vietnam and Switzerland do have in common is a high population density.  It’s the one thing that (nearly) all of these diverse nations have in common.

Many people will look at this list and quickly conclude that, when it comes to our trade deficit, the problem is China and so that’s where we should focus.  Somehow, some way, they’re obviously not playing fair with us.  They’re manipulating their currency, they’re ignoring workers’ rights.  They’re trashing the environment.  And so on.  So let’s get tough with China.

The problem is that China can legitimately complain that of course our deficit with them is big, simply because they are a big nation.  Person-for-person, our trade deficit with Japan is worse.  OK, so in an effort to be fair, let’s broaden our efforts to include Japan.  “Not so fast!” the Japanese will complain.  “What about Germany?  Their surplus with you is nearly as large and they have only half as many people as we do!”

The point is that in determining the root cause of these enormous deficits in order to formulate an effective trade policy, we need to factor out of the equation the sheer size of these nations.  Let’s determine who are really our worst trade partners on a person-for-person basis.  So here’s a list of our worst trade partners in terms of the per capita trade deficits:  Top 20 Per Capita Deficits, 2015.

Now we can see what a mistake it would be to simply conclude that China is the problem.  In per capita terms, they barely make the list of the top twenty worst deficits.  In fact, there are now ten European nations on this list and, in per capita terms, our trade deficit in manufactured products is worse with all ten of them than it is with China.  Here are some more key observations about this list:

  • Once again, all but two of the nations on this list – Sweden and Finland – are more densely populated than the U.S.  Most are far more densely populated.  Only three have population densities less than the median population density of the world, which is 184 people per square mile.  One – Ireland – is right on the median.  The other 80% of the nations on this list are much more densely populated.
  • Most of these are wealthy nations, with an average purchasing power parity of $44,370 per person.  In fact, the top of the list is dominated by the wealthiest.  Clearly, the argument that low wages cause trade deficits doesn’t hold water.  If anything, the cause and effect is exactly the opposite.  Running large trade surpluses makes nations wealthier.
  • There is one nation on this list that is a net oil exporter – Mexico.  I point this out because oil is priced in U.S. dollars, and every dollar spent on oil produced by foreign countries must be repatriated to the U.S., since that is ultimately the only place where they are legal tender.  Those dollars are repatriated in several ways, primarily through the purchase of American bonds or through the purchase of American goods.  The latter tends to make net oil exporters strong buyers of American products, which usually means that the U.S. enjoys a surplus of trade in manufactured products with such nations.  But not Mexico.  What this means is that the large trade deficit in manufactured goods that we have with Mexico is actually even worse than it appears.  For a nation whose population density is one of the lowest on the list – less than twice that of the U.S. – it means that something beyond population density – such as some unfair trade practice – is at work here.  Ditto for Ireland, which has fashioned itself into a tax haven for manufacturers, virtually bankrupting itself during the “Great Recession” of a few years ago.

If you are seeing such data for the first time, it may be a little early, based on this data alone, to conclude that population density is the driving force behind trade imbalances.  More proof is needed.  If such a relationship exists, then we should see exactly the opposite at the other end of the spectrum.  We should see a list of America’s best trade partners – those with whom we have trade surpluses – loaded with nations with low population densities.  We’ll take a look at that list in my next post.

If you’re already acquainted, however, with the relationship between population density and trade imbalances, which I explored thoroughly in Five Short Blasts, then this data is just further proof that population density is, in fact, the driving force behind these trade imbalances.  Such deficits are inescapable when applying free trade theory, which fails to account for large disparities in population density, to such nations.  It will only get worse with each passing year, exactly as we have seen.

 


Overpopulated Nations Sucking the Life out of American Manufacturing

May 11, 2016

I’ve finished my analysis of trade in manufactured goods for 2015 and the news isn’t good.  The effect of attempting to trade freely with nations that are much more densely populated than our own intensified yet again in 2015, dragging our deficit with those nations to a new record.

Check out this chart:  Deficits Above & Below Median Pop Density.  First, some explanation of the data is in order.  I studied our trade data for 166 nations and separated out those product codes that represent manufactured products.  Subtracting imports from exports, I was able to determine the balance of trade in manufactured goods for each.  I then sorted the data by the population density of each nation and divided these 166 nations evenly into two groups:  those 83 nations with a population density greater than the median (which, in 2015, was 184 people per square mile) and those 83 nations with a population density below the median.  I then totaled our balance of trade for each group.

As you can see, in 2015, our balance of trade in manufactured goods with the less densely populated half of nations was once again a surplus, but a smaller surplus of $74 billion.  This is down from $132 billion in 2014 and is less than half of the record high of $153 billion in 2011.

Conversely, our balance of trade in manufactured goods with the more densely populated half of nations was a huge deficit, plunging to a new record deficit of $722 billion, beating last year’s record by $53 billion.

Some observations about these two groups of nations are in order.  Though these nations are divided evenly around the median population density, the division is quite uneven with respect to population and land surface area.  The more densely populated nations represent almost 77% of the world’s population (not including the U.S.), but only about 24% of the world’s land mass (again, not including the U.S.).

Think about that.  With the people living in 76% of the world’s land mass, the U.S. enjoyed a surplus of trade of $74 billion in manufactured products.  But with the rest of the world – an area less than a third in size – the U.S. was clobbered with a $722 billion deficit!  Population density is the determining factor.  Not wages or wealth.  Wealthy nations were just as likely to appear among the deficit nations as among the surplus nations.  Not currency valuations.  Virtually ever currency in the world weakened against the dollar in 2015.  Population density is the key factor that drove these trade imbalances.

Some may point to the increase in the trade deficit as proof that currency values and manipulation are driving the imbalance.  But the data from previous years has shown that no such relationship exists.  A much more likely explanation is that American exports are declining and imports are rising because as more and more manufacturers lose ground to foreign competition, there are fewer and fewer products available for export or for purchase by domestic consumers.  Like a horde of mosquitoes, the overpopulated nations of the world are literally sucking the life out of American manufacturing and, with it, the American economy in general.

So what’s to be done?  “Give free trade enough time to work,” free trade advocates say, “and these imbalances will even themselves out.”  Wrong.  Free trade policy has had decades to work, beginning with the signing of the Global Agreement on Tariffs and Trade (GATT) in 1947 and the result has been that the trade deficit with densely populated nations just gets worse and worse.  This happens because free trade theory doesn’t account for the inverse relationship between population density and per capita consumption.

The only remedy that would restore a balance of trade is the same trade policy that the U.S. employed until 1947 to maintain such a balance – tariffs.  The use of tariffs to compensate the U.S. for nations’ inability to provide us access to equivalent markets – markets that have been emaciated by overcrowding – would restore a balance of trade and breathe life back into the American economy.