Last week, the Commerce Department released the trade data for the month of November. It was expected that the data for November would be the first to show that the tariffs enacted by Trump are beginning to “bite,” after the data for the previous two months was supposedly skewed by importers loading up in advance of the tariffs.
Didn’t happen. Although the trade deficit was down slightly, the drop was insignificant. At $49.3 billion, the overall deficit tracked right in line with previous months. More importantly, the deficit in the all-important category of manufactured products (where jobs are concentrated) dropped by $4.8 billion to $72.5 billion. Nice that it dropped, but it’s still the fifth worst deficit ever recorded. Here’s the chart: Manf’d Goods Balance of Trade. The deficit with China fell by only $2.8 billion to $35.4 billion – the fourth worst deficit ever recorded with China.
So far, all of the alarm raised by globalists about harm being done to the global economy has proven to be nothing more than fear-mongering. The impact of the tariffs – 10% on half of Chinese imports and 10% on steel and aluminum – has been zilch, other than to slightly erode the profit margins of those exporting companies and adding a couple billion dollars per month to federal revenue. And the whining by American farmers that China has stopped buying? Exports of “foods, feeds and beverages” is running $9.0 billion ahead of the same time in 2017, led by a 20% increase in soybean exports.
In the meantime, though the economy has been booming since the enactment of the tax cut last year, the effect is beginning to fade, as does the effect of every stimulus plan enacted for decades. Retail sales fell last month, as did industrial production, led downward by manufacturing, especially by auto production. It’s no surprise. Without significant measures aimed at restoring a balance of trade, the economy will be eroded as the trade deficit worsens, regardless of any economic stimuli.
The problem is that, although the tariffs implemented by Trump so far go far beyond what any president in modern times has been willing to do, it hasn’t been enough. The tariffs are too small and too narrowly focused. They need to include all imports from China and need to rise to 25%. And we need the 25% tariff on autos that Trump has long threatened.
The current trade talks with China are a complete waste of time. When the U.S. agreed to hold off on further tariffs in exchange for such talks, China had already won. Any deal with China, no matter the terms, is a win for China because it puts them back in the driver’s seat. All they have to do is make promises – the same thing they’ve always done. When they fail to meet them, what will the U.S. do? Engage them in more talks. Trade deals in general are utterly pointless, since tariffs are the only thing that can influence other nations’ trading behavior in our favor. It’s extremely disappointing that Trump doesn’t seem to fully grasp this.