Tag: trade

Decades-Long Trade Imbalance with China Coming to an End?

Finally we have a president willing to actually do something about the disastrous trade imbalance that we now have with China, which has been growing steadily for decades.  Back in the mid 1990’s, the annual trade imbalance with China was merely $10+ billion — a manageable amount — but it has ballooned from those modest levels to $375 billion for 2017 — that is, at the end of a 2017, China, for that year alone, was net $375 billion richer and we were that much poorer.

Frankly, given how gigantic this trade imbalance has become, if we had zero trade with China, the United States would be better off — because we would no longer see this massive wealth transfer from our shores to theirs.  Of course, a balanced trade with China where they buy as much from us as we buy from them would be ideal, but short of that, I say we would be better off without any Chinese goods.

Think of all the American production that would cause if the Chinese goods we currently buy from them were instead American made.  What a boon that would be!  And no more gigantic wealth transfer to another country and to one that may not have our best interest at heart.  And, oh by the way, did I forget to mention that China is still a totalitarian, communist country, with an ever expanding military, and a country where people who have fallen out of favor with the regime simply disappear.  That’s the country we have been enriching — at our expense.  Why?

Trump Slaps Fresh Tariffs on 200B of Chinese Goods

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European Union (EU) and Tariffs

Trump’s comment that the EU is a “foe” from an economic point of view made me look into our trade relations with Europe.  It turns out that we have a consistently large trade imbalance with the EU every year.  Most people are aware of the gigantic trade imbalance with China that has persisted now for decades, but may not be so aware of this problem with the EU.  Here are the numbers for 4 years:
2014 276.3 billion
2015 271.9 billion
2016 269.5 billion
2017 283.3 billion
So what the above means is that, on a net basis, for those 4 years, over a trillion dollars has left our country and gone to the EU — quite literally, on a net basis, the US is 1 trillion poorer and the EU is 1 trillion richer.  Why is this happening?  Why is the US selling to Europe so much less than we are buying from them when the US, by any measure, has very good companies and very competitive products?  I suggest the problem occurs because of EU tariffs.  Actually, tariffs are almost a definition of what the EU really is.  For states that are members, the EU is a genuine free trade zone — there are no tariffs between member countries, that’s the whole point.  But for the rest of the world, including the US, the EU uses prohibitively high, protectionist tariffs to shield domestic industries of member states from foreign competition.
It will be interesting to see what impact there will be on the trade balance between the US and the EU if a genuine free trade agreement is put in place where there are no tariffs at all on either side so that American products will be unimpeded by EU tariffs and their products unimpeded by our tariffs — a completely level playing field.  Who knows — we may even see a trade surplus on the US side of the ledger.

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