Trying to close current account deficits with trade tools could cause serious damage

Trump has been threatening not just 60 per cent tariffs on China but blanket 10 or 20 per cent duties on all trading partners. His aim is to cut the US’s overall trade deficit, which he regards as intrinsically bad for the country in profit-and-loss terms. 

This is intuitively appealing but economically illiterate.

 For all his protectionist instincts and actions, Joe Biden was a relatively good president for world trade. 

His fiscal stimulus — together with the low-interest rate policy of the Federal Reserve — helped demand and hence cross-border trade recover from the Covid shock. 

A bit of macroeconomic demand can outweigh quite a lot of microeconomic inefficiency.

Trump may also resort to trying somehow to force the dollar lower, worsening the inflationary impact of the tariffs and requiring the Federal Reserve — assuming it’s still an independent central bank by then — to raise interest rates. 

Alan Beatti Financial Times 7 November 2024

https://www.ft.com/content/af788efd-93de-4446-bc8b-abe5a8055136

Donald Trump achieved the hardest thing in government, which is to bind one’s successors. 

He moved the consensus on a big issue — trade — until the next president couldn’t go back, or didn’t want to. 

https://englundmacro.blogspot.com/2024/11/donald-trump-achieved-hardest-thing-in.html

Underskottet i USA:s varuhandel 108 miljarder dollar in September, ökade mer än väntat

USA producerar mer olja än Saudi Arabia

https://englundmacro.blogspot.com/2024/10/underskottet-i-usas-varuhandel-108.html

Tillbaka till Rolfs länktips 7 November 2024

https://englundmacro.blogspot.com/2024/11/rolfs-lanktips-7-november-2024.html