America’s Biggest Trade Surpluses in 2018

October 23, 2019

In my previous post, we examined the list of America’s biggest trade deficits.  Of the top 20 trade deficits, all but one were with nations more (usually much more) densely populated than the U.S.  It appears that population density may be a factor in driving these deficits.  But what will we find at the other end of the spectrum?  Will a list of our top 20 trade surpluses be dominated by more sparsely populated countries?  Well, let’s see.  Here’s the list:  Top 20 Surpluses, 2018.

We do see more sparsely populated nations on the list, but we also see a half dozen very densely populated nations.  At first glance, there doesn’t appear to be much correlation with population density.  But let’s take a closer look at those densely populated nations.  Do they all have something in common?  Indeed they do.  Most of them, but not all, are net oil exporters.  Canada, United Arab Emirates (UAE), Saudi Arabia, Qatar, Kuwait, Norway and Nigeria are all net oil exporters.  Why is that significant?  Because all oil is priced and sold in U.S. dollars.  And, ultimately, there is only one place where those U.S. dollars can be spent as legal tender – in the United States itself.  So those oil exporters use their “petro dollars” to buy products from the U.S.

Consider an example.  If China buys oil from Saudi Arabia, they have to pay for it with U.S. dollars.  No problem for China.  They’re rolling in dollars that Americans spent on their exported manufactured goods.  So now Saudi Arabia has a bunch of dollars.  They have no choice but to use it to buy American goods or American investments, like U.S. bonds.  But their economy is built around oil.  They don’t manufacture anything else to speak of.  So they have dollars to spend on manufactured goods and the only place they can spend those dollars is in the U.S.  Thus, the U.S. has a trade surplus in manufactured goods with Saudi Arabia and, for the same reason, with virtually every nation that is a net oil exporter.

That leaves two other very densely populated nations on the list that are thus far unexplained – Belgium and The Netherlands.  They’re tiny, adjoining nations who together enjoy the only deep water sea port on the Atlantic coast of Europe.  They use this to their advantage, making themselves into major points of entry for imports from America and for their distribution to the rest of Europe.  So their presence on the list is more of a geographic anomaly than anything else.

Now, back to the subject of population density.  With all of the above said, the list of our top 20 trade surpluses is still dominated by eleven nations that are less densely populated than the U.S., and three more that are only slightly more densely populated.  The average population density of these twenty nations is 239 people per square mile, compared to the average population density of 629 for the nations that represent our biggest trade deficits.  The combined population density of all twenty nations on the surplus list (total population divided by total land surface area) is  43 people per square mile, compared to 502 for the deficit list.  It certainly appears that population density is a real factor in driving trade imbalances.

A few more observations about this list of our biggest trade surpluses is in order:

  1. At number one on the list, Canada is both very sparsely populated while also being a huge oil exporter.  In fact, they are America’s biggest source of imported oil.  This is why the surplus with Canada is more than three times the size of our next largest surplus.  The U.S. has no better trade partner than Canada – hands down.
  2. Are you surprised to see Russia on the list?  It’s less surprising when you look at their population density.
  3. Also, take a look at the Purchasing Power Parity (PPP, roughly analogous to wages) of the nations on this list.  The average PPP is just under $40,000 per capita.  The average of the nations on the list of our biggest deficits was $35,000 – a difference of only 15%.  The difference in population density between these two lists is almost 1200%.  Which do you think is more likely to be the real driver of trade imbalances – wages or population density?

When it comes to the sheer size of trade imbalances, of course our deficit with China is bigger than our deficit with other, much smaller nations.  And of course our trade surplus with Canada is much larger than, say, our surplus with New Zealand.  Does that mean that Canada should enjoy more favorable trade terms than New Zealand, or that China should be punished with harsher trade terms than, say, Japan or Germany?  Hardly seems fair.  Trade policy should be formulated to address the factor that actually drives trade imbalances, regardless of the size of the nation in question.  That factor is population density.  In order to factor sheer size out of the equation, let’s now look at our trade deficits and surpluses in per capita terms, starting with our biggest per capita trade deficits.  The results are fascinating.  Stay tuned.


America’s Worst Trade Deficits in 2018

October 22, 2019

With little more than two months left in 2019, I’ve finally finished compiling and analyzing America’s trade data for 2018.  Why the delay?  Thanks to the government shutdown early this year, the trade data wasn’t released this year until nearly July – four months later than usual.  And tabulating the results for hundreds of 5-digit end use code products for 165 nations is no small feat.

What we’re looking at here are the deficits in manufactured goods as opposed to services and various categories of natural resources.  Why?  Because manufacturing is where the jobs are.  Yes, there are jobs associated with the harvesting and mining of natural resources but, pound for pound, those jobs pale in comparison to the number generated by manufacturing.

And it should be noted that there are more than 165 nations in the world.  The CIA World Factbook lists 229.  Nearly all of the 64 nations that I left out of this study are tiny island nations with whom, combined, trade represents only a tiny fraction of America’s total.  Also, their economies tend to be unique in that they rely heavily on tourism and their manufacturing sectors are virtually non-existent, if for no other reason than a lack of space to accommodate manufacturing facilities.

It should also be noted that I’ve rolled the results for tiny city-states into their larger surrounding nations – states like Hong Kong, Singapore, San Marino, Luxembourg, Liechtenstein, Monaco and others.  They too tend to have unique economies, heavily dependent on services like financial services, and mostly devoid of manufacturing for the same reason as small island nations – a lack of space.  There is no room for sprawling manufacturing complexes.

So, with that said, let’s begin with a look at America’s biggest trade deficits.  Here are the top twenty:  Top 20 Deficits, 2018.

It comes as no surprise that China once again has topped the list with a whopping $416 billion deficit – up from $385 billion the year before.  It’s more than four times as large as the next biggest deficit – Japan.  But Japan is less than one tenth the size of China, making the deficit with Japan nothing to scoff at.  Look at our deficit with Ireland.  It’s one tenth that of China, but China is 200 times as large as Ireland.

There are many other interesting observations that can be made about this list:

  1. There’s a lot of variety on this list – nations big and small, rich and poor, Asian, European and Middle Eastern nations.  But there’s one thing that all except one have in common – a high population density.  The average population density of this list is 629 people per square mile.  Compare that to the population density of the U.S. at 92 people per square mile.  On average, the nations on this list are seven times more densely populated than the U.S.
  2. With a few exceptions, these are not poor countries where wages are low.  Half of the top ten nations have a “purchasing power parity” (or “PPP,” a measure of wealth that is roughly analogous to wages) near or, in two cases – Ireland and Switzerland, above that of the U.S. ($59,500).  Only one nation in the top ten – Vietnam – has a PPP of less than $10,000.  So, the conventional wisdom that low wages cause trade deficits isn’t supported by this list.
  3. Two nations on this list – China and India – represent 40% of the world’s population.  On the other hand, there are others that, combined, make up less than 1% of the world’s total.  Naturally, if we have a trade deficit with a big nation, it tends to be really big.  In order to identify the factors that influence trade, we need to factor sheer size out of the equation.
  4. On average, the U.S. trade deficit in manufactured goods has risen by 166% with this group of nations over the past ten years.  Whatever it is that drives trade deficits has a very potent effect.  The fastest growing deficit is with India, rising by 428% in ten years.  India is the 2nd poorest nation on the list.  Perhaps low wages do play a role here?  On the other hand, nearly tied with India (in terms of the rate of growth in the deficit, not the deficit itself, which is actually larger) is Switzerland, the 2nd wealthiest nation on the list – wealthier than the U.S. – debunking the low wage theory.
  5. It’s often said that America needs to be more productive in order to compete in the global economy.  Yet we see nations like France and Italy on this list – nations notorious for long vacations, short work weeks, etc. – not exactly bastions of productivity.  So if productivity is an issue, why are we losing out to nations who are much less productive?
  6. In 2018, the U.S. had a total trade deficit of $816 billion in manufactured goods.  Of the 165 nations in this study, the top nine deficits on this list account for more than that entire total.  The U.S. actually has a small surplus of trade with the other 156 nations of the world combined.

Trade deficits matter.  As noted above, our overall deficit in manufactured goods in 2018 was $816 billion.  On a per capita basis, that’s a deficit of $2,500 for every man, woman and child in the U.S., or a deficit of nearly $10,000 for an average household of four.  That’s how much poorer you are than if we had a balance of trade.

In my next post, we’ll take a look at the other end of the spectrum – America’s top twenty trade surpluses in manufactured goods.  If population density is a factor, then we should see that list comprised of nations with low population densities.  And if low wages aren’t a factor, we shouldn’t see anything much different than what we saw on this list presented here – a list peppered with rich and poor nations alike.  So stay tuned.  You won’t find this in-depth analysis of trade or the factor that actually drives it anywhere else.


A Trump Report Card

April 23, 2019

It’s been a while since I’ve posted anything, and thought it’d be a good time to give President Trump a sort of mid-term report card, albeit a little late.  I’ll grade him in two subjects only – immigration and trade policy – since these two areas address the economic effects of population growth, both actual growth the effect of growth imported through trade with overpopulated nations, the focus of this blog.  Beyond these, little else matters.  What about environmental policy?  Without a focus on stabilizing our population (and virtually all of America’s population growth is driven by immigration), all other environmental policies are doomed to failure.  What about foreign policy?  It’s impossible to project strength in the world if you’re weak on trade.

So, with that said, let’s begin with the good news:

Immigration Policy:  A+

Trump has done a fantastic job on both illegal and legal immigration, each of which had been contributing a million people per year to America’s population growth.  Thanks both to Trump’s zero tolerance policy for illegal immigration and dramatic cuts in legal immigration, the Census Bureau reduced its estimate of the U.S. population by 1.3 million people at the end of 2018.  He spent a lot of political capital in his efforts to get funding for a border wall and, when Congress wouldn’t agree, had the guts to declare a national emergency to obtain the funds.  “What emergency?” the media cried at first, but not for long, when their own reporters in the field began reporting on the humanitarian crisis at the border that resulted from the adminstration’s efforts to enforce the law instead of turning a blind eye to illegal immigration as previous administrations have done.  Now there’s virtually no complaints about Trump’s enforcement efforts or his emergency declaration.  His policies are likely responsible for the fact that increases at the low end of the wage scale are outpacing higher income increases.  Recently, during a trip to the southern border, Trump declared that “Our nation is full.”  Truer words were never spoken.  Ultimately, this is the biggest reason that immigration needs to be reduced.  Trump has done an absolutely fantastic job of reining in out-of-control immigration.

That’s the good news.  Now for the not-so-good:

Trade Policy:  D

Such a low grade may seem surprising and harsh, especially in light of the tariffs on metals and his seemingly tough position with China, including a 25% tariff on some items and a 10% tariff on half of all Chinese imports.  However, it’s those very actions that elevate his score to a “D” from an “F”, the score I’d give to every previous president going as far back as Franklin Roosevelt.  They’ve been a nice start, but fall far short of what we were led to expect from him in the way of trade policy.  Like all previous presidents of the modern era, Trump has been sucked into endless trade negotiations, a ploy that nations with large trade surpluses have used successfully for decades to forestall meaningful action by the U.S. – namely, tariffs.  We were promised that the North American Free Trade Agreement (NAFTA) would be torn up or promptly replaced.  Trump’s administration did negotiate a new agreement, but one that reportedly does little to shrink the enormous deficit with Mexico and it may never even be enacted, if Congress has its way.

Action on China is stalled.  Tariffs on auto and parts imports now appear to be idle threats.  Beyond China, there’s been no action on reducing the trade imbalance with other nations like Germany, Japan, South Korea, Taiwan, Vietnam and a host of others.  The trade deficit in manufactured goods has continued to explode to new record levels under Trump.  Employment in manufacturing has stalled once again.  Trump sees trade as a venue for demonstrating his deal-making prowess, and he sees tariffs as leverage to use in trade negotiations.  He doesn’t understand that favorable “deals” with overpopulated nations are impossible and a waste of time, and that tariffs are the only way to restore a balance of trade with those nations.  Regarding the ongoing trade negotiations with China, he recently declared that the U.S. will win, whether a deal is reached or not.  He’s wrong.  The Chinese have already won by sucking him into time-wasting talks that, at best, will yield a deal that the Chinese will use to continue to grow their trade surplus with the U.S.  He had them on the ropes with the tariffs and then caved in, letting them off the hook.

In summary, Trump’s trade policy is stalled and our trade deficit is getting worse, not better.  This has been a major disappointment.  He’s wasted valuable time.  As I’ve said many times, a tariff program will produce some pain in the short term as prices rise and companies are slow to build manufacturing capacity in the U.S., but will ultimately yield incredible economic growth once that capacity is in place.  Had Trump been more aggressive with tariffs, the short term pain would have given way to some major economic gains by the time of the 2020 election.  Now, that’s probably not possible and, instead, his economic program is at risk of stumbling into the election.

He’s done a terrific job on immigration but all may be lost if he doesn’t get his trade policy off dead-center.


Auto Tariffs? Bring ’em on!

February 21, 2019

https://www.reuters.com/article/us-usa-trade-autos/automakers-brace-for-u-s-government-report-on-import-tariffs-idUSKCN1Q503G

A Commerce Department report that likely labels auto imports a national security threat which, under Section 232 of the World Trade Organization, would clear the way for Trump to impose tariffs, is now in Trump’s hands.  It could happen at any time now.  It’s impossible to overstate the consequences of such a move.  Without question, it would be the biggest shake-up in global trade since the signing of the Global Agreement on Tariffs and Trade in 1947.

Let’s begin with some perspective.  In 2018, 17.3 million cars and pickup trucks were sold in the U.S.  Of these, only about half of these vehicles were produced domestically.  The rest are imports.  Through November, the annualized value of imported cars in 2018 was approximately $180 billion.  The annualized value of auto parts was approximately $165 billion.  Together, that’s $345 billion worth of imported cars and trucks.  Roughly half of the cost to produce autos and parts is labor – about $172 billion.  If we assume that the average annual wage paid to auto workers is about $50,000, then that’s a total of about 3.5 million jobs that are lost to imports.

With that background, let’s take a look at the above-linked Reuters article about the possibility of Trump imposing a 25% tariffs on imported autos and parts.

The report’s recommendations may bring the global auto industry a step closer to its worst trade nightmare – U.S. tariffs on millions of imported cars and parts of up to 25 percent that many in the industry fear would add thousands of dollars to the cost of vehicles and potentially cost hundreds of thousands of jobs throughout the U.S. economy.

While it may be a “nightmare” for the “global auto industry,” it would be a dream come true for domestic U.S. manufacturers.  A 25% tariff would indeed drive up the cost of imports by thousands of dollars, and could even increase the cost of domestic autos some, depending on the amount of imported parts used in their manufacture.  The net result?  It’s not hard to imagine.  If you were in the market for a new vehicle that currently costs $30,000, which would you buy?  An import that now costs $37,500 or a domestic that now costs maybe $31,000.  It’s a no-brainer, one that would be repeated millions of times per year by new car buyers.  The result is that domestic auto manufacturing would soon double in volume while imports would slow to a trickle.  It’s as simple as that.

So how can one claim that  “hundreds of thousands of jobs” would be lost throughout the U.S. economy?  It’s easy to make that claim as long as you’re talking only about jobs lost and don’t include job gains elsewhere.  Sure, there’d be lots of jobs lost (and a couple hundred thousand is feasible) in the distribution, sales and servicing of imported autos.  But the loss of those jobs would be offset ten-fold or more by gains in the manufacturing, distribution, sales and servicing of domestic autos, not to mention the jobs involved in building the required manufacturing facilities, including buildings and machinery.

And what about this?

Senator Rob Portman, an Ohio Republican, recently introduced legislation that would shift responsibility for Section 232 investigations from Commerce to the U.S. Defense Department. The law containing the provision was passed in 1962 to keep U.S. industries healthy to meet Cold War defense needs.

“There is no way that minivans from Canada are a national security threat,” Portman told reporters.

Portman is wrong on two levels.  First of all, every imported car and truck weakens our manufacturing sector.  That could be critical in a time of war.  Just as important as our victories in the battlefield that ultimately forced the surrender of Germany and Japan in World War II was America’s industrial might that supplied them with weapons and materials.  No other nation on earth could even come close to matching America’s industrial power.  By the end of World War II, America’s shipyards were building complete destroyers, from the keel up, in two days, and Ford’s Willow Run factory in Michigan cranked out B-24 bombers at the rate of one per hour around the clock, or 650 bombers per month.  That didn’t happen by magic.  It took a veritable army of men and women experienced in manufacturing.

Existential wars – wars fought for survival against an enemy bent on conquering you – like our war against the Axis powers in World War II, are wars of attrition.  Who wins and who loses is often determined by who runs out of something first.  It doesn’t have to be ammunition or tanks or ships.  It can be something as simple as boots.  Every nut and bolt counts.  The lack of even one component can grind a war machine to a halt.  Supply chains that depend on overseas suppliers can be quickly and easily disrupted.  In other words, it’s critical to our survival that we maintain a robust manufacturing base, one that can be quickly converted to a wartime footing to supply everything imaginable that we might need.  Anything that degrades that capability is a national security threat.

Secondly, our national debt – now over $22 trillion – has grown to the point at which it threatens the viability of our economy.  Our national debt is directly tied to our trade deficit.  Every dollar drained from our economy by purchases of imports must somehow be put back to work in the economy, and the only mechanism available to do that is through federal deficit spending, financed by the sale of debt to those countries awash in our trade dollars.  Our debt is now growing by nearly a trillion dollars per year, and the $345 billion trade deficit in autos and parts is a major contributor.  The trade deficit is, without question, a national security threat and every imported minivan that Senator Portman references is part of the problem.

Tariffs are the only mechanism at our disposal for restoring a balance of trade – something we haven’t had since 1975 – and applying tariffs on the import of autos and parts is critical if we are to have any hope of achieving that balance.  Tariffs can’t simply be used as leverage to force other nations into trade concessions because they’ll never willingly give up their trade surpluses, regardless of their promises, as we’ve seen time and again for many decades.  We need tariffs now and they need to be permanent.

 


Auto Tariffs on the Table

November 14, 2018

https://www.reuters.com/article/us-usa-trade-autos/white-house-to-consider-commerce-department-auto-tariff-recommendations-officials-idUSKCN1NH2JP

There’s a lot in the above-linked article, reporting on the Trump administration’s consideration of tariffs on imported autos, that I can’t let pass without comment.  In short, the Commerce Department has submitted recommendations to the White House on whether and how to proceed with tariffs on imported autos and parts, based on its determination of whether auto imports pose a national security risk, something allowed under “Section 232” of the World Trade Organization rules.  The administration may hold off on implementation of tariffs, pending progress in talks with Europe and Japan aimed at restoring a balance of trade in autos and parts.

You may ask how auto imports pose a “national security risk.”  Good question.  I don’t know the administration’s rationale for it.  Imported cars themselves are surely not a risk.  It’s not as thought Toyota and VW and Honda and Mercedes and Hyundai and BMW have secretly planted bombs inside the cars.  The cars aren’t a risk.  However, what is definitely a national security risk is the enormous trade deficit in autos and parts.  There is no greater threat to the long-term viability of our economy than a big, sustained trade deficit that drives our budget deficit and national debt ever further out of control.  And we’ve now run a huge trade deficit for forty-three consecutive years.

The only mystery here is why the administration hasn’t acted already.  It’s becoming clear that the remaining globalists in Trump’s cabinet, like Larry Kudlow, Director of Trump’s Economic Council, and John Kelly, Trump’s Chief of Staff, have the upper hand over trade hawks like Trump’s trade advisor, Peter Navarro.  As a result, Trump is being sucked into the kind of endless “trade negotiations” that have paralyzed U.S. trade policy for decades.

But having the Commerce report ready for action would underscore a consistent threat from President Donald Trump – that he would impose tariffs on autos and auto parts unless the EU and Japan make trade concessions including lowering the EU’s 10 percent tariff on imported vehicles and cutting non-tariff barriers.

… Last month, the administration said it would open formal trade talks with the EU and Japan in early 2019 after the 90-day required congressional notification period ends.

Such talks are a complete waste of time.  Lowering barriers in the EU and Japan will make absolutely no difference in the trade deficit.  Europeans and Japanese don’t buy imported American cars because their countries are so crowded that their per capita consumption of vehicles is a fraction of that of Americans.  They don’t buy them because there’s no place to park cars and their roads are so crowded that they can’t make practical use of cars.  The only way to achieve a balance of trade in autos and parts is to keep their imports out.  Tariffs are the most effective method of doing that.

Of course, stories such as this are never complete until the free trade advocates have their chance to scare you with dire predictions.

The Alliance of Automobile Manufacturers, whose members include General Motors Co (GM.N), Volkswagen AG (VOWG_p.DE) and Toyota Motor Corp (7203.T), warned the price of an imported car would increase nearly $6,000, while the price of a U.S.-built car would increase by $2,000.

A study released by a U.S. auto dealer group warned the tariffs could cut U.S. auto sales by 2 million vehicles annually and cost more than 117,000 auto dealer jobs, or about 10 percent of the workforce.

If the price of imports goes up by $6,000 while the price of domestically-manufactured cars goes up by only $2,000, which are you more likely to buy?  The answer is obvious, but the above-mentioned groups only want you to focus on the fact that the cost of all autos will increase.  They want you to think that you won’t be able to afford a car any more.  They hope that you’re too dumb to realize that shifting manufacturing back to the U.S. will create hundreds of thousands of new jobs and will drive a demand for labor that will also drive wages higher – more than enough to offset any price increase.  U.S. auto sales won’t fall by 2 million vehicles annually.  They’ll actually increase as rising wages make cars more affordable.  And regarding the loss of auto dealer jobs (117,000 estimated in the article), you can bet that dealer jobs will be lost at the imports’ dealers if the foreign companies aren’t smart enough to begin building their cars in the U.S., but those folks will quickly find new work at GM, Ford and Chrysler.

Trump is wasting precious time by dithering with these worthless “trade negotiations.”  He needs to implement tariffs now and make them big enough – at least 25% – to have the desired effect, which is driving manufacturing back to the U.S.  Before the next elections in two years, Americans need to see tangible results in the form of a falling trade deficit and rising wages, or the globalists will surely regain the upper hand.


Trade Deficit Exploding

November 5, 2018

So far, the minimal tariffs that Trump has imposed on China (10% tariffs on half of their exports) has been powerless to stop a tax cut-fueled explosion in the trade deficit.  On Friday, the Labor Department released the employment report for October and, once again, it was a strong one.  The economy added 250,000 jobs.  Unemployment held steady, and wages rose at their fastest pace in years.  The economy is doing well, at least better than it has since the U.S. granted “most favored nation” status to China in the year 2000.

However, at the same time on Friday, the Commerce Department released the trade figures for the month of September – the first month that the tariffs were in full effect – and it’s clear that much of the economic stimulus provided by the tax cut that went into effect this year is ending up in the hands of China, Japan and Germany.  The trade deficit in manufactured goods exploded to another new record – $71.6 billion (an annual rate of $859 billion) – blowing past the previous record set only one month earlier.  Look at this chart:  Manf’d Goods Balance of Trade.

This morning, I came across this commentary on CNBC:  https://www.cnbc.com/2018/11/05/us-keeps-cutting-large-checks-to-china-japan-and-germany—commentary.html.  I don’t agree with everything said here, but it’s encouraging to see that people are starting to “get it” when it comes to the trade deficit:

“Those who are sadly and incorrectly arguing that this does not matter should note that America’s trade deficits will be added to its $8.6 trillion of net foreign debt recorded at the end of the second quarter.

That large overseas transfer of American wealth is also a drag on economic growth. In the first nine months of this year, the growth of the gross domestic product was lower than the growth of domestic demand as a result of increasing U.S. trade deficits.”

Finally, someone acknowledging that the trade deficit is the driving force behind our growing national debt.

Trump is exactly right to treat the trade deficit as a national security threat and to begin imposing tariffs on that basis.  So far, however, it’s been too little.  The tariffs need to be extended to all imports from China.  They need to be raised to 25% or more.  And they need to be extended beyond China, to Germany and Japan and anyone else who attempts to prop up their economies at the expense of American workers.  When that happens – when corporations stop seeing tariffs as a fleeting ploy in trade negotiations and instead see manufacturing in the U.S. as a more profitable business model than paying high tariffs – then and only then will trade become more balanced and fair and the trade deficit will begin to decline.


Trade Deficit in Manufactured Goods At Record High

December 7, 2017

The trade deficit in manufactured products* rose to a record high of $64.6 billion in October, surpassing the previous record of $63.3 billion set in March of 2015.  Take a look at this chart of our monthly deficit in manufactured goods:  Manf’d Goods Balance of Trade. Exports of manufactured goods haven’t risen since September of 2011 (in spite of Obama’s laughable proclamation in 2010 that we would double exports in five years).  In the meantime, imports have soared by almost $30 billion.  It’s a dubious distinction for President Trump who, during his inaugural address in January, spoke of “…rusted-out factories scattered like tombstones across the landscape of our nation…” and proclaimed that “This American carnage stops right here and right now.”

To be fair, Trump didn’t mean that it would happen on the spot.  His administration has been taking steps to address our trade problem, trying to renegotiate NAFTA (the North American Free Trade Agreement with Mexico and Canada), imposing tariffs on some products and, most recently, blocking China from rising to “market economy” status with the World Trade Organization.  Aside from the work on NAFTA, which may conclude soon with the U.S. walking away from that ill-conceived agreement, the rest amounts to little more than the token steps taken by previous administrations.  The net result is that the plight of the manufacturing sector of our economy grows steadily worse.

Enough is enough.  It’s time to walk away from both NAFTA and the World Trade Organization and begin implementing tariffs.  Any tariffs would be better than our current trade policy, but smart tariffs that address the real cause of our trade deficit – attempting to trade freely with badly overpopulated nations characterized by bloated labor forces and anemic markets – would be much more effective.  As an example, it was reported yesterday that Canada, angered by their treatment in the NAFTA negotiations, has canceled an order for Boeing-made fighter planes.  Why are we treating Canada this way?  Sure, we have a trade deficit with Canada, but it’s due entirely to oil.  In 2016, our biggest trade surplus in manufactured goods, by far, was with Canada – $44 billion, more than double any other country.  Canada is our best trading partner.  Why anger them?  Why not tell Canada that our beef is with Mexico, with whom we had a trade deficit in manufactured goods of almost $68 billion in 2016 – our third worst behind China and Japan – and that they’ll get just as good a deal from the U.S. without NAFTA?  Slap the tariffs on Mexico, not Canada.

We could completely wipe out our trade deficit in manufactured goods by applying tariffs to only ten countries – China, Japan, Mexico, Germany, Ireland, Vietnam, South Korea, Italy, India and Malaysia.  These ten countries, all more densely populated than the U.S. (all but Ireland are many times more densely populated), account for all of our trade deficit in manufactured goods.  While we have defiicts with others, they are much smaller and are offset by surpluses with the rest of the world.  The point is, we don’t have to anger the entire world with tariffs – just ten out of the more than 220 countries in the world.  So let’s be smart about how we do it, but the time has come, Mr. President.  Stop delaying the inevitable.  Do what you know needs to be done.

* The trade deficit in manufactured products is calculated by subtracting services, trade in petroleum products, and trade in foods, feeds and beverages from total trade, as reported by the Bureau of Economic Analysis in its monthly reporting of international trade.