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As trade deficit explodes, Trump finds he can't escape the laws of economics
Business
As trade deficit explodes, Trump finds he can’t escape the laws of economics
By David J. Lynch
Financial writer covering trade and globalization
March 6 at 7:40 PM
The Commerce Department said Wednesday that the United States last year posted an $891.2 billion trade deficit in merchandise, the largest in the nation’s 243-year history despite more than two years of President Trump’s “America First” policies. ... The results were a sobering reminder that the laws of economics still apply to a president who had promised to supercharge economic growth while simultaneously shrinking the chronic U.S. trade deficit.
Those twin promises proved incompatible, as economists had predicted. ... By cutting taxes and taking the lid off government spending, Trump gave the economy a shot of adrenaline. By thinning government regulations, he sought to further spur growth and hiring.
But as these efforts boosted take-home pay, Americans spent more on foreign-made iPhones, Toyotas and Heinekens. And as the U.S. economy surged ahead of Europe’s and Japan’s, four Federal Reserve interest rate hikes lifted the dollar, making American exports more expensive.
“Macroeconomics end up ruling. You can’t wish it away. You can’t tariff it away,” said William Reinsch, a former Commerce Department official now at the Center for Strategic and International Studies. .... “If you want to lower the trade deficit, have a recession,” Reinsch said.
David J. Lynch is a staff writer on the financial desk who joined The Washington Post in November 2017 after working for the Financial Times, Bloomberg News and USA Today. Follow https://twitter.com/davidjlynch
As trade deficit explodes, Trump finds he can’t escape the laws of economics
By David J. Lynch
Financial writer covering trade and globalization
March 6 at 7:40 PM
The Commerce Department said Wednesday that the United States last year posted an $891.2 billion trade deficit in merchandise, the largest in the nation’s 243-year history despite more than two years of President Trump’s “America First” policies. ... The results were a sobering reminder that the laws of economics still apply to a president who had promised to supercharge economic growth while simultaneously shrinking the chronic U.S. trade deficit.
Those twin promises proved incompatible, as economists had predicted. ... By cutting taxes and taking the lid off government spending, Trump gave the economy a shot of adrenaline. By thinning government regulations, he sought to further spur growth and hiring.
But as these efforts boosted take-home pay, Americans spent more on foreign-made iPhones, Toyotas and Heinekens. And as the U.S. economy surged ahead of Europe’s and Japan’s, four Federal Reserve interest rate hikes lifted the dollar, making American exports more expensive.
“Macroeconomics end up ruling. You can’t wish it away. You can’t tariff it away,” said William Reinsch, a former Commerce Department official now at the Center for Strategic and International Studies. .... “If you want to lower the trade deficit, have a recession,” Reinsch said.
David J. Lynch is a staff writer on the financial desk who joined The Washington Post in November 2017 after working for the Financial Times, Bloomberg News and USA Today. Follow https://twitter.com/davidjlynch
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