The Trade Deficit is Bankrupting the U.S.

February 13, 2018

Earlier this past week, the Commerce Department released the trade figures for the month of December.  The news wasn’t good.  The overall deficit jumped to $53.1 billion, the highest since the Great Recession in 2009.  Worse yet, the deficit in manufactured goods soared to a new record of $69.0 billion as a $2.7 billion increase in exports was swamped by a $6.7 billion increase in imports, which rose to $183.2 billion.  Check this chart:  Manf’d Goods Balance of Trade.  This is the 3rd month in a row that the deficit in manufactured goods has set a new record.  This is quite the opposite of what Trump promised during the campaign.  To be fair, the increase in the deficit is due to the improved economy, leaving Americans more willing to open their wallets and buy, and is not due to any trade policy blunders by Trump.  But Trump’s dithering on trade is directly responsible for the lack of improvement.  All we’ve gotten is talk, threats and endless (and pointless, I might add) negotiations (primarily on NAFTA) – nothing more than we’ve gotten from previous administrations for decades.

In another story last week, Congress approved (and Trump signed) a spending bill that ended the brief government shutdown – a bill that grows the national debt by an estimated $1.5 trillion over ten years.  This is on top of the $1.5 trillion added by the Republicans’ tax cut legislation.  And all of that is on top of the $1.5 trillion cost of the American Recovery Act implemented under Obama.  Yesterday, Trump introduced a budget plan that would grow the national debt by $7.5 trillion over the next ten years.

So what’s the relationship?  Why do I bring up the trade deficit and the national debt in the same post?  As I explained in Five Short Blasts, the trade deficit is the root cause of our federal budget deficit.  To understand, draw a line around the United States on a map.  Now, draw arrows that represent cash outflows from that circle and cash flowing in.  The money spent on imports – currently running at about $3 trillion per year – is an outflow.  The money we collect from exports that we sell – currently running at about $2.4 trillion per year – is an inflow.  That leaves a deficit of about $600 billion per year.  If that money didn’t come back in some fashion, every penny of U.S. wealth would eventually be gone.  Every American would be flat broke.  It’s exactly the same as your check book.  Keep taking money out without putting any back in and – well- you know what happens.

So the trade deficit puts us in a huge bind.  Fortunately, though, it presents those countries who sold us those imports with an equal but opposite problem.  They’re now collecting a big pile of U.S. dollars that ultimately have value in only one place.  The U.S. is the only place on earth where U.S. dollars are legal tender.  This means that those countries who sold us those imports now have to reinvest those dollars back in the U.S. in some fashion.  For one, they can use them to buy exports from the U.S. – which they do – but obviously not in equal measure.  What to do with the rest?  Invest in American companies?  That makes no sense.  Those are the same companies that their exports are trying to drive out of business.  So they use the money to buy American debt obligations, or “treasuries.”

The federal government then uses the money collected by selling treasuries to finance deficit spending, thus plowing back into the economy the dollars that the trade deficit took out.  In this way, the federal government is able to keep the economy on a positive footing, maintaining an illusion of prosperity in the U.S.  And the biggest way they do this is by collecting less tax revenue from you than it takes to finance their programs.  Essentially, the federal government subsidizes your income.

Check out this chart.  It graphically shows the relationship between the growth in the national debt and the cumulative effect of the trade deficit:  Cumulative Trade Deficit vs Growth in National Debt.  Notice how closely the two parameters track each other.  Also, you’ll notice that any time the growth in the national debt lags the cumulative trade deficit, a recession is the result – the most recent being the “Great Recession” of 2008.  In the run-up to that recession, Congress focused on reining in the deficit and the result was George Bush’s famous “jobless recovery” from the recession that occurred at the turn of the century.  Home ownership was declining and the housing/mortgage industry turned to sham loans to put people into homes – bad loans that nearly collapsed the entire banking industry.  When Obama took office, he correctly blamed global trade imbalances, and world leaders agreed.  What did they do about it?  Not a damn thing.  Like parasites, they could all agree that they were killing the host, but all continued to hungrily feed on it.

So how bad is the national debt?  Let’s begin with a little historical perspective.  In 1929, the national debt was $16.9 billion dollars, which was about 16% of GDP (gross domestic product).  By the end of World War II, it had understandably ballooned to $269.4 billion, or 121% of GDP – unacceptably high.  By 1973, it was whittled back down to only 33% of GDP.  Then it began to grow again.  Not coincidentally, in 1975 the U.S. ran its last trade surplus and became a “debtor nation.”  Soon after, the national debt began to explode.

Some economists have used the benchmark of the GDP to gauge the seriousness of the debt.  As long as it doesn’t exceed 100% of GDP, they would claim, the national debt is manageable.  Where do we stand now?  Take a look at this chart of national debt, measured as a percentage of GDP:  National Debt as Percentage of Chained GDP(2).  We’re back over 100%.  It actually declined slightly last year as the budget deficit shrank a little and as the GDP grew more than it has in years.  We’re not likely to see it decline again any time soon as the national debt is now expected to grow by $7 trillion in the next ten years.  Although it took 32 years to climb from 32% of GDP to 100% in 2013, it will hit 200% in much less time if nothing is done about the trade deficit.

However, the situation is actually worse than that.  The “GDP” isn’t the one who is on the hook for the national debt.  It’s taxpayers – you and me.  So let’s take a look at the national debt in per capita terms – that is, how much of it each one of us owes.  Take a look at this chart:  National Debt Per Capita, 1929-2017.  This should scare the hell out of anyone.  Each of us is now on the hook for $50,000 of the national debt, which is 2-1/2 times the burden of each American at the end of World War II!  And look at this chart:  National Debt as Percentage of Total Household Net Worth.  In 1962, the national debt was only 3% of the total household net worth of all Americans.  Today, it’s hovering near 30%.

“Total household net worth” includes some very wealthy households, like those of Bill Gates, Warren Buffet and other billionaires.  Where does your household’s net worth fit in?  Take a look at this chart of household net worth, as measured by the Federal Reserve in its tri-annual survey of household finances:  Household Net Worth.  While the “mean” (or average) household net worth has grown nicely  from $163,000 in 1962 to $692,000 in 2016, the “median” value remains stuck at about $100,000 where it’s been for two decades.

You need to understand the difference between “mean” and “median.”  If nine people have $1 in their pockets and a tenth person has $100 in his pocket, then the “mean” value of what these ten people have in their pockets is the total divided by the number of people which, in this case, is $10.90.  The “median” represents the value at which half of the people have more and half have less.  In this case, the “median” value of how much these people have in their pockets is only $1.  Half of these ten people have $1 or less, and half have $1 or more.  (One of them has a lot more!)

This means that the household net worth of at least half of all Americans is $100,000 or less.  And, in all likelihood, most of the other half don’t have a whole lot more than $100,000.  The median value is skewed by only a small percentage of households.

On average, a household has 3.2 people.  Remember that each American “owes” $50,000 of the national debt.  That means that each household owes about $160,000 on the national debt.  Compare that to the median household net worth of $100,000.  In all likelihood, if the amount you owe on the national debt were subtracted from your net worth, you’d be completely broke.  You’d actually be “in the hole” by about $60,000!

To be honest, I’ve been hearing warnings about the national debt for all of my nearly seven-decade life.  So far, nothing really bad has happened.  At some point, you have to begin to wonder if those who claim that the national debt doesn’t matter are right.  Who knows how this might actually turn out?  Nobody knows.  Will Americans ever have to pony up the money to pay the debt?  I doubt it.  It’s in no one’s interest to bankrupt Americans.  After all, the rest of the world depends on us continuing to buy their products.  What is likely to happen, in my opinion, is the same thing that has happened in other cases where nations have been unable to repay their debts.  There will be a “debt-forgiveness” program of some sort, perhaps overseen by the World Bank, that will let us off the hook, but will come with some extremely harsh concessions – a Greek-style austerity program as a minimum.  The U.S. will become a slave-state for the rest of the world, never again able to exert any influence over world events or even our own destiny.

Is that what we want?  There’s only one escape from this dilemma – the restoration of a balance of trade.  The only way to make that happen is through the use of tariffs.  It’s exactly what Trump proposed during his campaign but now seems unwilling or unable to implement.  Where is the media outrage over this situation?  Instead of the news being dominated by stories of our looming economic demise – which it should be, all we get is stuff that more properly belongs in tabloids or on page 20 of The Times, at best.  It seems that our journalists are either too ill-informed on the subject of economics to probe the issue, or are too lazy to bother looking into it.  The salacious “she said, he said” stuff is easier and sells better.  It’s not exactly “fake news” but, in the grand scheme of things, it’s certainly trivial news.  There are much more important things, like the trade deficit and the national debt, that needs our focus.

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Another Month, Another Record Trade Deficit

January 6, 2018

Yesterday the U.S. Bureau of Economic Analysis released the international trade data for the month of November:

https://www.bea.gov/newsreleases/international/trade/2018/pdf/trad1117.pdf

The overall deficit rose to $50.5 billion, the worst reading since January of 2012, but not quite a record, thanks to steady, dramatic improvement in the balance of trade in petroleum products which, at one time, used to be the driving force behind the trade deficit.  But no more.  What drives the deficit now is manufactured products, and the deficit in that category hit a new record in November of $65.1 billion, topping the previous record of $64.7 billion set only one month earlier.  Check out this chart:  Manf’d Goods Balance of Trade.  Exports of manufactured goods rose to their highest level since December of 2014, but that rise was swamped by a jump in imports to a new record of $176.8 billion.  Here’s a chart of imports and exports that also shows the goal that Obama had set in January of 2010 to double exports within five years:  Manf’d exports vs. goal.  It never happened.  It never will.

Scrapping existing trade deals and returning to the use of tariffs to restore a balance of trade, bringing manufacturing back to the U.S., was the centerpiece of Trump’s promise to “Make America Great Again.”  So far, all we’ve gotten is the same dithering on trade that we’ve gotten from previous administrations for decades.  This trade data shows that instead of becoming great again – at least in the manufacturing sector of the economy – America is getting worse.  This isn’t what Americans voted for a year ago.

 


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.


Trump on Trade with China: Media Misses the Point

November 10, 2017

http://www.cnn.com/2017/11/08/politics/donald-trump-xi-jinping-statement/index.html

As was widely reported yesterday morning, Trump emerged from two hours of a meeting with Chinese premier Xi Jinping and had this to say:

I don’t blame China. “After all, who can blame a country for being able to take advantage of another country for benefit of their citizens? I give China great credit.”
The above-linked article goes on:
Instead of pointing the finger at Beijing for exacerbating trade disputes, Trump blamed past US administrations “for allowing this trade deficit to take place and to grow.”  It was a notable shift in tone from a President who was elected to office partly for his tough talk on holding other countries accountable for practices that disadvantage US workers.
Trump went on:
We want a vibrant trade relationship with China.  We also want a fair and reciprocal one. Today, I discussed with President Xi the chronic imbalance in our relationship as it pertains to trade and the concrete steps it will take to solve the problem of massive trade distortion.
A “notable shift in tone?”  Maybe a shift in tone, but the media is completely missing the not-so-subtle and huge shift in U.S. trade policy that this represents.  Previous presidents have chided China for unfair trade practices like currency manipulation, theft of intellectual property, subsidizing their exports, and manufacturing in sweat shops that also pollute with reckless abandon.  They used to put all of the onus on China for helping to correct our enormous trade imbalance.  The Chinese must have been rolling in the aisles with laughter when our trade negotiators left.
Not this time.  What Trump is saying is that the time has come for the U.S. to take the matter of restoring a balance of trade with China into our own hands.  Trump has been itching to begin levying tariffs on imports from countries that have large trade surpluses with the U.S. and, though he made no mention of tariffs in this speech, his vow to take matters into our own hands should send chills down the spine of Xi.  Restoring balance with China by slowing their exports with the use of tariffs would practically collapse the Chinese economy.
But so far it’s just talk.  What is Trump waiting for?  It seems clear that he’s biding his time with China in the hope that their help with reining in “Little Rocket Man” in North Korea will lead to his demise.  Probably a smart move but, if it doesn’t work by the time North Korea has the ability to put a nuke on an ICBM, the U.S. will have to act and the Chinese will lose whatever leverage holding the North Korean attack dog at bay has afforded them.
In the meantime, our trade deficit in manufactured goods grows worse.  Here’s the latest chart, gleaned from the trade data for September that was released on last Friday:  Manf’d Goods Balance of Trade.  Nothing has changed since Trump took office, and nothing will until he stops dithering with pointless negotiations and begins applying tariffs to these countries with bloated labor forces and emaciated markets.  My sense is that that time is growing nearer, but time will tell.

How’s Trump Doing?

October 3, 2017

With some slack time on a rainy day in the north woods, I thought I’d take a few moments to share some thoughts about Trump and his policies to date, as they relate to the economic problems wrought by worsening overpopulation: falling per capita consumption and the inevitable trade deficits caused by attempting to trade freely with badly overpopulated nations. So here goes:

Immigration:
Still no border wall. Other than that, I’ve been quite pleased with his other actions – the travel ban, the dramatic slowdown in visa processing, going after sanctuary cities, deporting illegal aliens, and so on. I also applaud him for his stance on the “dreamers,” those brought here as young children by their illegal alien parents. It may surprise you to learn that I’m actually in favor of allowing them to stay, even providing them a path to full citizenship. By all accounts, we’re talking about 800,000 people here. But it needs to be a one-time program. And it needs to be part of a bigger immigration reform that includes dramatic cuts in legal immigration – at least 50% (including student visas), and an end to the pyramid scheme of “family preferences” that, within a few generations, would make virtually every person on earth a candidate to become a permanent legal resident in the U.S. Trump is right to kick this issue back to congress and to demand action, but I don’t understand why he’s “selling it” so cheap. By demanding the above reforms, he could put an end to our out-of-control immigration. No senator or congressman would dare vote against it because all anyone would ever remember is that they voted against the “dreamer act” and in favor of deporting the dreamers.

Trade:
Here I have to say that I’m “hugely” disappointed in Trump’s failure to deliver on his promise to raise tariffs and/or border taxes in order to rebalance trade. But perhaps I’m impatient for action on this issue. His administration has taken some tough stances and is in the process of renegotiating NAFTA while also trying to reform the World Trade Organization. Last week it was revealed that the U.S. has been quietly blocking the filling of vacancies on the panel of appeals judges at the WTO and is now trying to assume a veto power if judges aren’t available. Reportedly, Trump told John Kelly, his new chief-of-staff, that he wants someone to bring him some tariffs. And most recently, when Boeing complained of Bombardier “dumping” planes on the U.S. market, the Trump administration promptly levied a 216% tariff on Bombardier planes. So there’s still reason for optimism.

Tax Reform:
Though this is the issue that excites the business community, the media and maybe even average Americans the most, for me it’s a non-issue unless a border tax is included as part of the reform. Dramatic cuts to corporate taxes, combined with some minimal cuts for average taxpayers, will blow a huge hole in the budget, just like it did when Reagan did the same thing back in the ‘80s. Sure, it’ll stimulate economic growth just a little, but no more than the amount of tax reductions that are plowed back into the economy. To expect a trillion dollar tax cut to generate economic growth of $4 trillion (the amount of growth it’d take to make it revenue-neutral) is a hocus-pocus fairy tale. And cutting corporate taxes that much will simply leave corporations with more money to invest in more job-killing manufacturing overseas. But all of that would change if a border tax were part of the package. Then it would truly be revenue-neutral and would fuel an explosion in economic growth. Trump is missing a huge opportunity by not insisting that a border tax be part of the package.

Paris Climate Accord:
Trump was 100% right to pull out of this agreement. Ask anyone and everyone the purpose of that agreement and every single person will tell you that its goal is to stop climate change. And every one of them would be wrong, because they haven’t read the stated mission of the accord, which is to merely slow climate change to a pace that would allow “sustainable development” to continue and, by the way, would essentially “tax” Americans to help fund that development in the rest of the world. “Sustainable development” is the very reason the world now finds itself in this global warming fix – because what world leaders thought was “sustainable” has proven not to be. So if global warming is slowed so that “sustainable development” can continue unabated, then every other problem associated with our exploding population – environmental and otherwise – will worsen, including mass extinction as habitat loss accelerates, more landfills, more trash in the ocean, more underground disposal of various hazardous wastes (including nuclear), and now a new one – the underground disposal of CO2 removed from exhaust streams. Where does it end? It needs to end now, and just maybe mother nature is doing us a favor by using climate change to wake us up. With all of that said, it disturbs me to hear that Trump may consider re-entering a renegotiated climate accord.

Repeal and replace “Obamacare”:
For me, this is another non-issue. The unaffordability of health care is a symptom of a deeper underlying problem, namely that every year the U.S. economy is drained of about $800 billion through the trade deficit, making everyone poorer and more dependent on deficit spending by the federal government to maintain an illusion of prosperity. Fix the trade deficit and the whole health care issue will go away.

So that’s it. Although I never really liked Donald Trump very much, and cringe at a lot of his “tweets” and some of the things he says, overall I’ve been pretty pleased with where the country is headed under his direction. But the trade/tariff/border tax issue is critical. If we don’t see action on reducing the trade deficit in manufactured goods, I fear that all will be lost. Like you told John Kelly, Mr. Trump, “we want tariffs and we want them now!”


Tax Reform Needs Border Tax to Work

September 13, 2017

http://www.reuters.com/article/us-usa-tax/trump-says-rich-might-pay-more-in-taxes-talks-with-democrats-idUSKCN1BO1HM

Trump and Congress are now hard at work on tax reform, promising huge cuts in both corporate and individual taxes.  How is that possible without blowing a gigantic hole in the budget and sending the national debt on a new trajectory?  Here’s how Treasury Secretary Steve Mnuchin explains it in the above-linked article:

Mnuchin told Fox the administration would use its own economic assumptions to gauge the impact of its tax cuts on the federal budget deficit and the $20 trillion national debt, a key issue in Washington’s intensifying tax debate.

“It will be revenue neutral under our growth assumptions,” Mnuchin said. The administration believes that tax cuts will lead to much faster growth than do congressional analysts or private forecasters.

“So, we can pay for these tax cuts with economic growth,” he added.

That’s absolute nonsense, and he knows it.  Yes, cutting taxes will boost economic growth, but only by the amount of the tax cut.  Suppose that the combined corporate and individual cuts result in a cut of $1 trillion per year.  If every dollar of that was spent domestically and not put into savings, then GDP (gross domestic product) would grow by $1 trillion. And let’s suppose that this is taxed at a rate of 25%.  That’s federal revenue of $0.25 trillion.  So revenue would actually decline by $0.75 trillion.  The only way for it to be revenue neutral would be if the $1 trillion tax cut mysteriously generated $4 trillion in spending.  That’s impossible.  It’s simple math.

However, there is a way to make these tax cuts revenue neutral.  Include a new source of revenue by taxing foreign exporters who are getting a free ride in the American economy.  Last week, the Commerce Department released the trade figures for the month of July.  Contrary to Trump’s promise that this “stops right here and stops right now,” the deficit in manufactured goods has actually gotten worse.  Take a look at this chart:  Manf’d Goods Balance of Trade.  The deficit in manufactured goods is now running approximately $63 billion per month, or $750 billion per year.  Exports haven’t risen one iota in six years, while imports have soared by $25 billion and are running approximately $2 trillion per year.

Now, consider what a 30% tariff (or border tax) would do.  First of all, it would drastically reduce imports  – by half, let’s say.  That means that $1 trillion of manufacturing would return to the U.S.  That’s how much the GDP would grow.  Taxed at 25%, that would be a new stream of revenue of $250 billion.  That leaves $1 trillion in imports that would be taxed at 30% – another new stream of revenue that totals $300 billion.  Add these revenue streams totalling $550 billion to the revenue generated by the increase in GDP created by the tax cut – $250 billion – and you have revenue of $800 billion – nearly off-setting the loss of revenue caused by the tax cut.

In late August, Trump reportedly told John Kelly, his chief of staff, that “I want tariffs.  Bring me some tariffs!”  Now’s the time to do it.  Roll the tariffs into the tax reform package and no senator or congressman will be willing to tell his/her constituents that “I voted to keep your taxes high because I don’t like tariffs.”  It’d be political suicide.

The time has come to make foreign manufacturers pay their fair share for access to the American market.


Seven Months Into Trump’s Administration, Has Anything Changed?

August 14, 2017

I’m back from a hiatus at my north woods retreat, and there’s a bit to catch up on.  For now, however, I’m wondering what has really changed in terms of the economy since Trump took office seven months ago.  Let me begin by sharing a recent experience.

My wife and I stopped into a small restaurant in Boulder Junction, Wisconsin for dinner one evening earlier this week.  Boulder Junction is a tiny town in Vilas County in northern Wisconsin, a popular vacation area frequented mostly by folks from Chicago and Milwaukee.  A polite Asian lady, speaking broken English, seated us and told us the waitress would take our order shortly.  Upon ordering, the waitress assured us that our order would be prepared as we had requested.  It wasn’t.  When we complained, the waitress – without even offering to make it right – apologized and explained that there was a “language barrier” in the kitchen.  A language barrier in Boulder Junction!  I couldn’t believe it.

Another old lodge that we visit for dinner is staffed with waiters and waitresses from Lithuania.  They just can’t find reliable help in the north woods of Wisconsin, they explain.  However, another restaurant just up the road seems to have no problem.

I know what’s going on here.  These little businesses don’t have the wherewithal to recruit foreign laborers.  So how do they get them?  While I can’t provide proof, I’m certain that the Chamber of Commerce is importing foreign labor and pushing them on these businesses, or making them available at rates so cheap that these businesses don’t even have to bother with trying to hire locally.  So, when it comes to Trump’s promises to stop these kinds of practices, there’s no evidence that anything has changed.

Changing gears, the Commerce Department released the June trade figures last week.  Here’s a chart that shows the balance of trade in manufactured goods:  Manf’d Goods Balance of Trade.  As you can see, it continues on the same downhill trajectory that it’s been on throughout the Obama administration.  In fact, in the 2nd quarter of 2017, the deficit in manufactured goods set a new record of $185.6 billion.  In other words, contrary to Trump’s inaugural vow that:

“… rusted out factories scattered like tombstones … stops right here and stops right now!”

matters have actually gotten worse.  While the Trump administration is currently involved in renegotiating NAFTA and in negotiations with the Chinese, and the U.S. negotiators are reportedly taking a much harder line in these negotiations, I’m very pessimistic that any improvement in our balance of trade will result.  Why?  Because there’s nothing to negotiate.  The ONLY thing that will make a difference in America’s favor is tariffs, something that no nation would agree to in “negotiations.”  Anything they will agree to will be totally unenforceable and any attempts to enforce them would be met with whining and, more importantly, a cut-off in funding of candidates unless they pressure the Trump administration to back off of enforcement actions.  These same kinds of negotiations have been tried and have failed for decades.  Most recently, Obama’s deal with South Korea, which he hailed as a “big win for American workers,” has actually proven to be a disaster.

In the meantime, the “new normal” economy that emerged during the Obama administration, in the wake of the Great Recession, goes on.  GDP growth remains stuck in the 1-2% range, wages are stagnant and job growth (when viewed in the context of the “100,000 jobs is the new zero” economy) is anemic at best.  The economy is being kept afloat by deficit spending (up 10% so far this year), a once-again growth in credit and an inflated stock market.  The illusion of good times isn’t going to last.

I’m growing impatient with the Trump administration’s dithering on these issues.  Can you tell?