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In 2021, the trade deficit shattered records, and the January trade deficit set a new all-time high. But no one seems to care, which is absurd, and we should all think about it seriously.
The trade imbalance, like the massive federal budget deficit, is no longer discussed in the financial press. There has been little criticism of President Biden on either issue, and administration officials have not been questioned about how things can be reversed. In fact, some commentators bizarrely argue that trade deficits demonstrate how strong an economy is!
Former President Trump was supposed to reduce the trade deficit, having vowed throughout the 2016 campaign that he would do so and repeatedly mocked U.S. trade negotiators for their lack of financial acumen. He boasted about his “friendship” with world leaders, most notably Chinese President Xi Jinping, claiming that it would result in favourable trade deals for the country.
We can’t just ignore these trade deficits forever; people have been lulled into a false sense of security that they no longer matter. The reality is that it is more important than ever. Because markets have decided, based on Fed intervention, that trade deficits don’t matter, they now matter more than ever because they’re larger than ever.
Another milestone was recently reached by the US economy, as the January trade deficit soared to an all-time high of $107.6 billion, up $26 billion from the previous month’s imbalance of $80.7 billion.
Trade hawks embraced Trump’s economic nationalism, believing that he would not only correct imbalances but also spark an American industrial renaissance. After his unexpected victory in 2016, optimism was at an all-time high.
Trump wisely avoided discussing trade during his failed re-election bid in 2020, and his opponents, despite the president’s dismal performance, did the same. Of course, the Democrats were constrained by an obvious feeble, senile, and vile candidate at the top of their ticket.
Trump’s trade-hawk supporters, like Democrats, have been reticent about the escalating trade numbers, and they, like the former president, are now discredited when it comes to trade. If America couldn’t close its trade deficit with an economic nationalist as president for four years, there must be something wrong with their thinking.
The growing trade deficits are not the result of poor trade agreements or ineffective tariff policies. They are the result of the United States’ deteriorating economy, which is now based on consumption and debt rather than production. A growing economy produces more than it consumes, resulting in trade surpluses rather than deficits.
Due to many years of against free enterprise financial regulation – extravagant tax assessment, administrative weights, inflationary money related strategy, “swarming out” spending plan deficiencies, joblessness sponsorships, the lowest pay permitted by law regulations, and a foundation overemphasis on advanced education – the United States is presently not a modern influence and doesn’t give a helpful climate to monetary development.
Because it is the world’s reserve currency, the United States has been able to offset trade imbalances by importing goods in exchange for dollars. Even its position as the world’s reserve currency appears to be in jeopardy, as the dollar’s dominance is eroded by the surge in price inflation.
This will have a devastating impact not only on the domestic economy but also on the country’s foreign trade, as the country will no longer be able to export dollars for goods in the future.
The growing trade deficit is a far better indicator of an economy’s health than GDP, unemployment figures, or the government’s “official” rate of price inflation. All of these statistics are so manipulated that they don’t even come close to revealing what’s going on in the real world. The trade deficit is a more accurate indicator of a country’s productive capacity.
When the United States’ economy was at its peak, it was a creditor nation with trade surpluses and goods sold all over the world. It had a high investment funds rate, a low inflationary climate, minimal public obligation, and a solid regard for private property, especially the right of business visionaries to recruit and fire whomever they needed. The free market and free trade benefited all socioeconomic groups, not just the top 1%.
The trade deficit can be reduced, but not through bureaucratic state-sponsored deals that benefit big businesses and multinational corporations at the expense of American consumers. Except for the removal of government intervention from the economy, proper trade policy is none at all.