As of this coming Sunday, Donald Trump will have been in office for 16 months. He started running for president more than three years ago. In that 36 months or more, how is it possible that a man who is ostensibly a “business genius” has absolutely no idea how trade or trade deficits work? It is damn near impossible to believe no one has explained it to him to date. I have worked on a number of campaigns for Congress and there has always been someone there to explain trade to anyone willing to listen, including the candidate or someone else. In other words, there is no way it hasn’t been explained to him, so we have to assume he just doesn’t understand it.
This morning, he Tweeted the following:
…We have not seen China’s demands yet, which should be few in that previous U.S. Administrations have done so poorly in negotiating. China has seen our demands. There has been no folding as the media would love people to believe, the meetings…— Donald J. Trump (@realDonaldTrump) May 16, 2018
There is nothing but ignorance in these Tweets. Is the trade deficit with China troubling? It depends on your perspective. If you lost a good union job because your company decided to build its factory in China, then you will be very negative toward the trade deficit. Of course, if you have built a company that makes iOS and Android apps and made millions from people who use your app on their smartphone, which was likely made in China, your feeling on the Chinese trade deficit is probably much different.
All the trade deficit means is that there are more goods coming into the United States from China than is going out to China. If you are convinced that the only way the United States can stay on top is through a strong 19th CEntury manufacturing economy, then we have a problem. If you realize that the world is changing and it really doesn’t matter much who makes anything anymore, there is no real reason why this should bother you.
And seriously; the trade deficit does not mean we’re “losing hundreds of billions of dollars per year.” That’s just ridiculous. It is Republican orthodoxy that every dollar spent is a dollar lost, but that doesn’t make it right. It’s how Republicans justify cutting the hell out of SNAP to give huge tax breaks to people and parties that don’t one. The GOP makes its minions think all government spending as a “loss,” even if the government spends billions and gets trillions back, which is exactly what we get from the various student financial aid programs. We spend tens of billions of dollars every year making sure young citizens get an education, and we reap the benefits, as the educated populace makes more money, buys more homes and cars and other goods and services and also pays more taxes. And yet, in Republicans’ minds, that student financial aid is “free money” because they can’t even conceive of the idea that government investment can reap huge rewards.
For someone to claim “the country lost money” over the trade deficit, it is necessary to ignore several very glaring and very obvious things. Like Walmart and Amazon, for example. If trading with China is a net loss, then explain why Walmart and Amazon are the kings of retail. if you walk through a Walmart, you will be hard-pressed to find anything that is not made in China, or elsewhere in Asia. And yet, Walmart is the largest brick-and-mortar retailer in the country and they are practically printing money. Last fiscal year, Walmart took in more than $500 billion in revenue and reported a gross profit of more than $127 billion. If Lord Donny’s analysis is correct, and the trade deficit with China is a loss, then he needs to explain how Walmart was able to report a gross PROFIT margin of more than 25 percent on a HALF TRILLION IN REVENUE.
Likewise, Amazon sells a large number of goods made in China, including their own hardware offerings. They even have more than a small number of Chinese vendors who sell to Americans directly through Amazon. And yet, Amazon saw its revenues increase by more than a third last year, to about $178 billion (yes, that’s Billion with a B). It’s profit dropped slightly because they are still putting most of their money back into the business, but based on Donny’s “logic,” they should have lost a fortune, since buying goods from China seems to be a net loss for the country.
Trump also lies about the size of the trade deficit with China. For one thing, he likes to value the trade deficit at $500 billion, probably because the number is easy to remember. However, he’s misstating that by a lot. Yes, Chinese manufacturers sold us $505 billion worth of goods, but we also sold them $130 billion in 2017. That makes for a trade deficit of $375 billion, which is well below $500 billion. However, we also have a services surplus over them. The services surplus with China was more than $38 billion. That means, by claiming the trade deficit with China is $500 billion, he’s overstating it by more than a third. (Source)
Not that it matters really, since Trump obviously doesn’t know what the trade deficit means, anyway.
Also published on Medium.