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Trump promised trade war and got a huge deficit

A high trade deficit, Trump wrote on 3. March, via Twitter, is the result of "a very stupid trade agreements and policy. Our Jobs and our prosperity, we are to

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Trump promised trade war and got a huge deficit

A high trade deficit, Trump wrote on 3. March, via Twitter, is the result of "a very stupid trade agreements and policy. Our Jobs and our prosperity, we are to forgive other countries that benefit from us over the years. They laugh about what fools our leaders are. That's over now."

It is not over, as the yesterday by the Department of Commerce of the United States, published Figures show. The trade deficit of the USA increased in the entire year of 2018, the highest ever recorded value of 891 billion dollars, involves the services, the amount of the deficit to 621 billion dollars, the highest since the financial crisis.

you don't Look at the development of the deficit over the course of time, so it is only every month since the election of Donald Trump continued to increase, but also significantly stronger than in the period prior to his presidency. Alone, the deficit of the United States to China – the main focus of the whole discussion – every year, since Trump's Power is increased.

duties are not the Biggest

These data are a severe embarrassment to the trade war policy, Donald Trump unleashed. The countries of the world provide significantly more goods and services to America, as the USA sell Vice versa in the world, is for the U.S. President, a sign that his country is drawn from the other across the table. His conclusion: "tariffs are not the Greatest," as he announced it via Twitter. The Americans increase the cost of foreign goods, so his logic to be purchased whose products are less and those from the United States for more. The trade deficit would have to shrink.

But countries do not operate like a commercial enterprise. Sales of a country abroad, drive profits, and purchases from abroad are no loss of driving costs. In foreign trade it is an exchange. And if in a country like the USA in General, more is spent by companies for investment by consumers or by the state, as income through the own production is created, then just import surpluses and a resulting rise in the debt to foreign countries can provide for the compensation.

With its tax relief in the amount of 1.5 trillion dollars, the Trump in the year 2017 on the way brought, he fired the expenditure and the debt of the United States, and thus the import surplus.


Economists are Economists, the foreign trade result is, therefore, not a Surprise. From their point of view, the argument was never convincing that higher taxes on the deficits can be reduced. An explanation of the Capital account. It is the other side of the foreign trade relations and shows the course of the capital flows.

The world's dominant has the role of the dollar and the US capital market that, in General, more capital flows into the US than Vice versa of the United States abroad. The capital import surplus is the mirror of the foreign trade deficit. Because of this Surplus, fueled in the USA, consumption and investment and thus imports also. Alone as long as the US Dollar, assumes the function of the world reserve currency, foreign trade deficits of the United States.

Something loosely, you could say, the Rest of the world gives the Americans credit for this shopping with him. As long as in the US, debt is increasing, the growth of cheer (and this remains for the United States easy and cheap), will change the trade deficit, nothing.

Where Trump is right

Donald Trump is right when he says, the deficits mean that the U.S. domestic employment will be withdrawn. And it is also true that aligned countries, notably China and Germany, the economic and growth model, conversely, the United States almost to the Surplus, so to lower domestic spending than revenue, so that export net capital and net export surpluses to provide for full employment.

This type of international division of labor was often cited as a potential risk. To change it up a bit, would be a fundamental Change in the international foreign trade relations is necessary. The surplus countries should do more for domestic demand, which would also benefit the local populations benefit. At least, China wants to draw such a change anyway. A tariff war changes – as, once again, shows nothing to the fundamental imbalances that poisoned the climate and disrupts existing value chains creation. (Editorial Tamedia)

Created: 07.03.2019, 15:54 PM

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