US Trade Wars and You

By:  Richard E Walrath and Patricia L Johnson

Biggest, best, highest, lowest are all terms all too familiar with this Administration, so let us apply those terms to trade.

On September 5, 2018 the monthly trade report was released indicating $50.1 billion dollars was added to the goods and services trade deficit for the month of July, which by the way was $4.3 billion higher than the June 2018 deficit.

As a clarification (only for members of this Administration who don’t seem to comprehend the difference), an increase in the trade deficit is not a good thing.  We are, in fact, moving backwards.  The goods and services deficit is a full 7% higher than it was for the same period in 2017.

But let us not forget the to mention the highest:

July imports of goods and services $261.2 billion, were the highest on record (not good).

July Imports of goods $214.9 billion were the highest on record (not good).

July imports of services $47.2 billion, were the highest on record (not good).

The United States has three major trading partners (in alphabetical order) Canada, China and Mexico, which by strange coincidence are the same three countries that our current Administration has involved in an apparent no-win trade war.  These three countries represent approximately 45% of all US trading partners.

Why is it an apparent no-win?  A cursory review of the July numbers should tell you everything you need to know on the subject.

Data Source:  US Census Bureau Foreign Trade Report – September 5, 2018

When we import 75% more in goods from China than we export, does it make any sense whatsoever to wage a trade war on the country?  That obviously depends on the goal of the administration.   Is the Administration intent on bringing on a recession?  Tariffs mean higher prices; higher prices mean inflation.  The Federal Reserve will ward off inflation by raising interest rates.  We’re two steps and a tumble from a recession, as well as being overdue.  This Administration is on a path towards bringing on the inevitable sooner.

The trade deficit will continue to get worse until those in control see the error in their thinking.  People in this country will continue to buy if they have a job and money to spend.  Tariffs mean higher prices for consumers and we are already paying the higher prices.  Farmers are losing markets and our legislators are considering additional subsidizes for farmers over this Administrations apparent no-win trade war.

The Administration believes our ace in the hole are soybeans, due to the inability of China to grow enough on their own soil.  They are already working on solving that problem by buying cheap Russian land and growing soybeans.  It takes far less time to grow a soybean than it does to negotiate an apparent no-win trade war.

© 2018 Johnson and Walrath

Permission is granted to republish in its entirety.

Richard E Walrath is a former budget analyst for Ohio State University and currently resides in Ohio with his family.  Patricia L Johnson is a former special assignment writer/photographer residing in the Midwest.