[ad_1]
Share
President Trump says that America Showing a trade deficit means "employment and wealth" As we explained in Business Insider earlier this month, this statement is logically and historically false. The figure on the left above shows that the relationship between trade deficits and growth in the United States, which dates back nearly 30 years, is the reverse . Growing growth tends to increase imports by increasing consumption. Imports did not mean that "jobs and wealth are given to other countries": they were a sign of a strong US economy.
Yet President Trump is determined to reduce the US trade deficit with massive new steel tariffs. aluminum, automobiles, washing machines and other products. The idea is that if America stops importing such products, it will start making them here. But with the US unemployment rate at 3.8%, its lowest level in eighteen years, there is little or no capacity available to do so. The capacity should be transferred from other sectors. The overall effect of customs duties is therefore to reduce the power of purchase of US consumers by raising prices – no more jobs, no more growth, no d & # 39; higher net exports.
More information:
United States
Trade
Competitiveness
Current account balance
U.S. Trade deficit
But even this photo is too pink. This is because US companies depend on imports to remain globally competitive. By losing access to foreign parties, they will lose market share for companies operating abroad that can access and therefore maintain lower prices and higher quality.
Critical, as shown in the figure to the right above, imports into the United States are not finished goods but intermediate goods – that is, inputs used to make American products, which can then be sold worldwide. In fact, almost all of the Chinese exports that Trump chose for tariffs in April are considered equipment or other inputs. The loss of these inputs is a direct injury to US companies
Peter Navarro, Trump's commercial advisor, does not believe it. "It does not do any good long-term to the US economy," he said in January, when his companies "assemble" US products composed mainly of foreign components. "But it's absurd that a US product is manufactured" primarily "with US or foreign components does not tell us if tariffs are advantageous.A US product may simply be impossible, or too expensive, to to do without these components.
And we know, in fact, that Navarro understands this. This is because it has defended US penalties against Chinese telecom equipment manufacturer ZTE, which They have cut down US suppliers, ZTE is so dependent on US computer chips that its operations have been paralyzed by US sanctions, and Navarro believes that ZTE can not survive without foreign components. he that the American firms are different?
More information:
United States
Trade
Competitiveness
Current account balance
U.S. Trade deficit
