The tariffs as used by President Donald Trump are viewed by many as having no impact on our overall trade deficit, and much is made of Trump’s disdain for trade deficits.
Thirty months into the Trump Presidency, the US economy continues to import more than it exports. This isn’t a problem, since the trade deficit is of no great consequence as an economic measure. But in President Trump’s telling this is a clear and present danger….
Suppose something else, though.
Mr Trump has imposed 25% tariffs on $200 billion of Chinese goods, and he’s threatened a duty on another $300 billion. This has narrowed the US-China bilateral goods trade gap in recent months, but the total US trade deficit reached a record high in 2018. … Producers are leaving China, but not for America.
While Chinese goods exports to the US fell 12.3% year-over-year from January through May, Vietnam saw a 36.4% increase, according to US Census data. Taiwan had a nearly 22.5% year-over-year increase in the same five months, more than triple the increase from 2017-18. South Korean exports to the US increased 12.4% over the period.
Recall one of Trump’s other reasons for disdaining the trade deficit: the People’s Republic of China declines to play by international trade rules, and it steals or extorts other nations’ (ours in particular as one of the, if not the, leader in) technology and intellectual property, along with merely proprietary materials.
If the PRC doesn’t want to play by the same rules as the rest of us, it doesn’t need to trade with the rest of us.
Thus: if the tariffs aren’t realizing their first secondary purpose, moving production back to the US, they are gaining their primary purpose: moving production, and associated export, out of the PRC.
That’s not all bad.