I’m under the gun this morning in terms of time, but I wanted to drop the below three links on the recent trade stuff that’s been roiling the markets this week…
I’ve already weighed in on how counterproductive this all is, understanding that China does not trade fairly with the rest of the world.
read: 1,2,3,4 let’s have a Trade War!
The trade deficit, however, is not entirely a negative thing. It shows up in the profit margins of the $20 trillion US stock market, as our globally oriented companies have stuff manufactured there and then brought here at lower prices than American consumers would normally pay. We also sell a ton of stuff there that is highly profitable (technology, entertainment, consulting and other services) – in contrast with steel and aluminum, which are barely profitable.
Trade imbalances are not a meaningful indicator of the economic prosperity of a nation and its people. We get way more out of global trade than we give, no matter what someone with an agenda says on a rally stage. The US economy is the largest in the world. The US stock market is the largest in the world. US citizens have household wealth of $100 trillion. We have not been losing, nor are we losing now.
This is not the same as saying all segments of the country / economy have benefited equally from globalized trade. Of course there are examples of unfairness and abuse. But correcting some pieces of unfairness – with something as aggressive as a tariff – may not be in the best interests of the whole pie. And that’s if they can be corrected at all. Trump is not wrong in all of his rhetoric, but the unintended consequences of what he’s proposing may leave everyone worse off in the intermediate term, even if a few key elections in PA or OH are won in 2018.
Below, some different sides of the issue, make up your own mind: