Trump Is Reducing U.S. Trade Deficits
Here’s a letter to the Wall Street Journal.
Editor:
You report that Pres. Trump’s hike in taxes on Americans’ purchases of imports – which taxes, by the way, haven’t been this high since 1948 – is inflicting such damage on the U.S. economy that foreign investors are souring on it (“How the Reversal of the ‘American Exceptionalism’ Trade Is Rippling Around the Globe,” March 29).
Mr. Trump’s plan to achieve his long-cherished goal of eliminating U.S. trade deficits is working!
Because foreigners can’t invest in the U.S. any dollars they spend on American exports, the more attractive is the U.S. economy to foreign investors, the more they invest here relative to purchasing American exports. U.S. trade deficits swell as global capital pours in. To reverse this intolerable situation of foreigners contributing more capital to the U.S. economy than Americans contribute to foreign economies – in short, to eliminate U.S. trade deficits – the president must make the U.S. economy less productive and, hence, less attractive to global investors. As these investors sour on America’s economy, they’ll invest less here and soon Americans will finally, after a half-century, again have balanced trade.
Of course, the damage inflicted by Mr. Trump’s protectionism on the U.S. economy will also worsen the economic fortunes of ordinary Americans. No matter. They will – despite falling wages, higher prices, and slower economic growth – surely be grateful to the president and his fellow Republicans for fulfilling his campaign promise to eliminate U.S. trade deficits.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
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