Trump On Trade – A Primer

One of Trump’s primary campaign themes was that other countries are taking advantage of the US. He said he would tear up trade agreements unfair to the US and impose tariffs on offending countries. And as President, he is following through on his promises. First, he abandoned the Trans-Pacific Partnership. Next were tariffs imposed on dishwashers and solar panels. Then, tariffs on aluminum and steel of 10% and 25%, respectively, were announced. And Trump is now threatening to levy $50 billion in tariffs and penalties on China for the theft of trade secrets, etc. The following provides background on US trade, spells out the likely outcome of these actions and the fallacies underlying them.

Background on US Trade

Table 1 provides US trade data. The US imports more goods than it exports. In contrast, it has a significant positive balance on services. We hear that the US is reducing its dependency on oil. It is definitely down some, but it still runs a trade deficit of $111 billion with the rest of the world.

Table 1. – US International Goods and Services Trade Balances

(bil. US$)

Source:

US Bureau of Economic Analysis

Table 2 lists the leading US trading partners. The European Union is the largest followed by China and the immediate US neighbors, Canada and Mexico.

Table 2. – US Leading Trade Partners, 2016

(bil. US$)

Source: US Bureau of Economic Analysis

Countries in the “Crosshairs”

a. Aluminum and Steel

Table 3 provides data on the largest providers of Aluminum and Iron/Steel. The countries in green are exempt, at least temporarily from the new US import tariffs. China will be hit hard.

Table 3. – Aluminum and Iron/Steel Imports

(bil. US$)