The Problem Trump Is Seeking to Tackle Is Very Real
There is a giant problem that commentators are ignoring.
The United States’ trade deficit is of incredible proportions and is only sustainable because the dollar is the world’s reserve currency—a status it is going to lose.
The US trade deficit in 2024 was approximately 1.2 trillion dollars. GDP was approximately 30.1 trillion dollars, 4% of GDP.
By contrast, the EU had no significant trade deficit as a percentage of GDP. Zero.
Even the chronic UK trade deficit was only 2.2% of GDP.
The US, as the world’s reserve currency, has been able simply to create more dollars through bonds or quantitative easing to finance its trade deficit.
Nobody—including the US Federal Reserve—really knows how many dollars exist in the world.
On the wide M3 measure encompassing cash, bank accounts, government bonds and all other instantly convertible dollar-denominated instruments, it is believed there are about 21 trillion dollars in the world. (This is a measure of money, not of assets such as property and shares).
What the trade deficit actually is, in practice, is the world giving the USA astonishing quantities of very real goods in exchange for some transferred data or bits of paper.
That depends on a confidence which is waning.
The difficulty is that America’s manufacturing capability has been destroyed. There are no great rows of blast furnaces sitting there just waiting to come back on and replace imported steel.
Those viewing Trump’s proposals as a joke need to say what they would do about the US trade deficit.
Because the world is not going to supply them free goods forever.
Craig Murray Savage Minds 20 April 2025
Craig Murray is an author, broadcaster and human rights activist. He was British Ambassador to Uzbekistan from August 2002 to October 2004 and Rector of the University of Dundee from 2007 to 2010.
Excess demand triggered by the fiscal and monetary response to the pandemic merely exacerbated imbalances created by the policy response to the global financial crisis (GFC) of 2008-10.
Did they really think there would be no financial consequences to keeping interest rates at or near zero for more than a decade?
https://englundmacro.blogspot.com/2023/08/major-central-banks-balance-sheets-have.html
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