Many feared wrongly that Trump would start nuclear war.
Instead, he launched the nuclear option with potential trade wars around the world.
Why do this?
The numbers are absolutely staggering.
While the U.S. is over $21 trillion in debt, the federal government is racking up a 2018 budget deficit of nearly a trillion or so, give a take a few billion, according to the Congressional Budget Office and Government Accountability Office. Alongside this mess is the fact that our trade deficit has been running in the red for decades, now over $560 billion in 2017.
The U.S. trade deficit is more than the total deficits of the top 25 deficit trading countries combined. Those with the most surplus trade balances, as reported by the U.S. Bureau of Economic Analysis, include Germany, Japan, China and South Korea with combined surplus CAB, or Current Account Balances, exceeding $700 billion in 2017.
The U.S. CAB is over $460 billion in 2107, the largest in the world. The second largest is the U.K. at $92 billion.
Of all countries, China presents the most concern for the U.S. with its predatory practices of dumping products, high tariffs, restrictive trade, intellectual property theft, infiltration into universities (science, technology, engineering) with Confucian Centers, cyber intrusion and hacking and more.
The Census Bureau reports that U.S. trade deficit with China exceeded $375 billion. A distant second and third place, Japan and Germany, were less than $70 billion each.
The EU in total had a $135 billion surplus with the U.S. in 2017.
The U.S. simply cannot match the imports of foreign goods with exports of American goods under the current scheme.
The reason is obvious: unfair tariffs on our products has created an imbalance of trade that has sustained a massive and unsustainable trade deficit.
Trump, as the “change agent” for America, has said enough is enough. We cannot afford to continue this in a world increasingly dominated by China.
Trump calls the situation for what it is, “ridiculous and unacceptable” and that “we are like the piggy bank that everybody’s robbing.”
He believes we can cut the deficit and hit 3 or 4 percent annual GDP growth rates, something economists and Democrats said would be impossible.
But worse, some tariffs are intended to inhibit or prohibit trade on specific products altogether.
The U.S. has been particularly vulnerable to manufactured products such as metals, autos and machinery, electronics and consumer products. U.S. job losses to China alone since they joined the World Trade Organization is estimated to be well over 2.4 million by the WTO.
MarketWatch reports that economists used to blame it on automation, but now agree that China and others with market restrictions are to blame for 3 to 6 million job losses.
No one likes tariffs against their products. “Globalism” ruled the political thinking in the U.S. by both political parties.
Yet the outcry against the U.S. raising its tariffs is loud.
As Trump raised tariffs on imported aluminum and steel, China reacted in kind. Canada is outraged that Trump would raise tariffs on their dairy products, even with some Canada tariffs of near 300 percent on our products per PolitiFact.
Opponents of tariffs claim that no one wins a trade war.
Trump makes an important point, however, “we already lost the trade war.” Now we are looking for fairness and a level playing field. Further, in a shock to many countries, Trump suggested eliminating all tariffs to have real free trade.
The expressions on the faces of world leaders was clear – they were frozen and dumbfounded at the idea.
It was a similar reaction at the NATO Conference in Brussels last year when Trump said it is time for member nations to start paying their “just dues” for protecting their own countries with American military might.
Now Trump launches a risky initiative to strike back against tariffs by fighting fire with fire.
While early in this war game, it seems China has more to lose. China’s stock markets in Shanghai and Shenzhen are reeling with massive losses.
Canada is rethinking its policies on dairy products. The EU is going to act on aluminum and steel being dumped by China.
Early results suggest Trump is winning: 4.1 percent GDP growth in Q3 according to the U.S. Bureau of Economic Analysis, but with a continued positive trend line, even as Democrats say it is a sugar high, one-time event. It was also announced that Q3 reported a $50 billion drop in the trade deficit.
As usual, if he wins, America wins big.
If he loses, the Democrats will be cheering in the streets.
Trump likes to manage conflict head-on.
We can only hope we don’t crash.
John Shoemaker lives in Natick.