By Nancy Thorner -
As noted in an article by Kimberly Amadeo, updated May 10, 2018: The United States has the world's largest trade deficit. It's been that way since 1975. The deficit in goods and services was $566 billion in 2017. Imports were $2.895 trillion dollars and exports were only $2.329 trillion.
The U.S. trade deficit in goods, without services, was $810 billion. The United States exported $1.551 trillion in goods. The biggest categories were commercial aircraft and automobiles.
Worth noting is that we have the largest deficits with our top five trading partner (Census provides trade data by country for goods only, not services):
- China- $636 billion traded with a $375 billion deficit.
- Canada- $582 billion traded with an $18 billion deficit.
- Mexico - $557 billion traded with a $71 billion deficit.
- Japan - $204 billion traded with a $69 billion deficit.
- Germany - $171 billion traded with a $65 billion deficit.
Trump Makes Good on His Promises
During his first year in office, Trump and his top economic aides made repeated threats and warned that preliminary investigations were launched into whether certain imports were being unjustly subsidized. But no concrete steps were taken.
That all changed in March of this year when our "America First" president went on the offensive. Becoming more confident as to his own judgement – – ignoring the warnings of then chief economic advisor Gary Cohn, who has since left the administration — Trump is now willing to do the radical things he promised during his campaign and for many years before that.
Already in place in China are tariffs on Chinese imports of steel (25%) and aluminum tariffs (10%) to protect U.S. metal makers. These went into effect on March 23, 2018.
Following is an excerpt of the White House report issued on March 8th about the importation of steel into the U.S. upon advisement of the Secretary:
"The Secretary found and advised me of his opinion that steel articles are being imported into the United States in such quantities and under such circumstances as to threaten to impair the national security of the United States. The Secretary found that the present quantities of steel articles imports and the circumstances of global excess capacity for producing steel are “weakening our internal economy,” resulting in the persistent threat of further closures of domestic steel production facilities and the “shrinking [of our] ability to meet national security production requirements in a national emergency.”
Listed below are the top steel exporters to the United States, along with their corresponding percentage of total U.S. steel imports:
- Canada 16.7 percent
- China 2.9 percent
While China ranks low in the importation of steel into the U.S., it does rank 2nd in aluminum.
- Canada: US$8.5 billion (36.3% of total aluminum exports
- China: $3.5 billion (15.1%)
Steel and Aluminum tariffs imposed on European Union, Canada, and Mexico
On June 1, 2018, U.S. tariffs on imports of steel and aluminum were imposed on the European Union, Canada, and Mexico at 25% and 10% respectively. Trump had announced worldwide steel and aluminum tariffs in March of 2018, but exemptions were granted to some major trading partners. Canada, Mexico and the EU were among those granted relief. In the interim, the United States pursued negotiations to address the administration's concerns about the state of domestic steel and aluminum production. Negotiations had a deadline of deadline of May 31, 2018. See here the global steel industry by numbers:
How does Justin Trudeau get off slamming Trump for placing 20% tariffs on Canadian steel and 10% on Canadian aluminum? Canada, in case it’s slipped Trudeau’s mind, places a 275% tariff on most American dairy products, 300% on our butter. Additionally, Canada is at the top of the list of exporters of both steel and aluminum to the U.S.
Trump's Latest Tariff Moves
Friday. June 15
Trump announced a stiff 25% tariffs on Chinese imports which sparked immediate retaliation from Beijing. This prompted Beijing to slap punitive duties on 128 US goods, including pork, wine, and certain pipes. (The US and China did reach a "consensus" at high-level trade talks led by US Treasury Secretary Steven Munchin in May, where China offered to ramp up purchases of American goods by only $70 billion to help cut the yawning trade imbalance with the United States, whereas Trump had demanded a $200 billion deficit cut. When President Trump didn't receive his $200 billion deficit cut, he made good on his threat to unleash a raft of tariffs. To Trump the move was justifiable, as payback for the theft of American intellectual property and technology.)
Monday, June 18
Trump asked his administration to identify a new list of $200 billion in Chinese goods that would be penalized with tariffs.
The day after China's Commerce Ministry said that it will take counter measures if the U.S. publishes an additional tariffs list.
Talk of Tariffs Rattle Stock Market and Economists
Many are saying that Trump's strategy will create significant collateral damage. Peter Navarro and other Trump advisor who are convinced that the US will win a trade war. Their argument is that Beijing has more to lose than the U.S. given China's dependence on selling to the U.S. market. Just consider the math! China is limited somewhat in the degree of retaliatory tariffs it can apply, simply because it doesn't import nearly as much in American goods compared with what the U.S. takes of Chinese products. China imported just $129.9 billion from the U.S. in 2017, compared with $505.5 billion in exports, according to the Census Bureau.
Secretary Wilbur Ross in his guest appearance on Fox Business with Lou Dobbs on June 15, 2018, expressed the following thoughts:
The trade imbalance started many years ago. We are just calling for balanced international trade, which is so important for this nation's economic growth and our national defense. The Business Press is wringing its hands about a possible trade war, and the stock market is reacting negatively, but we have already lost the trade war. Consider what happened when tariffs were leveled on washing machines, solar power, and steel and aluminum. Factories are now starting up in this country. The sky is not falling, and positive signs do point to continued growth of our economy. Most worrisome to Secretary Ross is our technical deficit because of China's predatory economic policies in using material stolen for the U.S. For Ross, balancing trade is so important. "Trade deficits only don't matter if you don't have them."
Off-the-Cuff Remarks by Author
I don’t claim to be an economist. But having seen and heard from far too many of them ever since Trump rattled their cage by announcing tariffs on imported steel and aluminum, I really don’t think I’d care to be one.
I can't say for sure if the proposed tariffs will be good or bad for American workers and consumers, but I do know a few things: One, I believe Trump is convinced the tariffs will prove to be beneficial for the U.S. or he wouldn’t consider calling for them to be imposed. Two: I take comfort in knowing he’s being advised not just by his usual trustworthy gut, but by people like Larry Kudlow who prefer capitalism to all the other isms out there. Three: I know that the talking heads on TV whose hair goes up in flames the second the President says or does anything aren’t to be trusted. They hate him and they’re not too crazy about those of us who elected him.
Perhaps most telling of all is that Trump’s critics are all agonizing over retaliation by China, Mexico, Canada and the EU, while ignoring the fact that his tariffs are in retaliation to those that have been leveled on our products for decades. If you didn’t know about that, it’s because until now we haven’t had a president who cared to mention that embarrassing fact, let alone do something about it. For instance, the EU places a 10% tariff on American cars; we have had a 2% tariff on theirs.
Trump vows Fair Trade Relations with G7 Nation
As vowed by President Donald Trump on Saturday, June 10, 2018, at a press conference from the Canadian town of La Malbaie before leaving the G7 meeting to head to Singapore to meet with North Korean leader Kim Jong-un on June 1: "The US will do whatever is necessary for his country to have fair trade relations with other countries. Trump then added: “Look, all of these countries have been taking advantage of the United States on trade." Those days are over. Trump wants a quick end to trade practices that he says have led to an exodus of American companies and jobs to other countries.
Shouldn't the American people also desire fair, reciprocal, and balanced trade, so wealth remains in this country to grow our economy instead of contributing to the growth of other countries?
