Wednesday, March 7, 2018

How Bad Is Our Trade Deficit?

Financial FAQs

President Trump just announced a 25 percent tariff (tax) on imported steel, and 10 percent tariff on aluminum. Will this improve our 2017 $566 billion trade deficit? Can we lower our trade deficit with higher tariffs on such strategic products? Is the deficit so dangerous to our economic health that we have to lower it in this way?

No, because most of the trade deficit comes from US consumers’ love of imported goods--$54.3 billion in January, according to Econoday. In 2017, the total U.S. trade deficit was $566 billion. It imported $2.895 trillion of goods and services while exporting $2.329 trillion.

Graph: Econoday
Whereas the trade gap in primary metals is minuscule. This gap totaled $3.8 billion in the latest data for this reading which is November. Econoday says, “But here it's important to note that this deficit isn't only one way. U.S. firms actually exported a very sizable $4.0 billion in primary metals to foreign buyers in the month as tracked in the blue columns of the graph, a sum that could be at risk should a trade battle for metals begin to open up. What the administration is of course aiming to reduce is the graph's red columns, the roughly $8 billion in monthly imports of primary metals.”

Consumer products and automobiles are the primary drivers of the trade deficit, according to, a personal finance website. In 2017, the United States imported $602 billion in generic drugs, televisions, clothing, and other household items. It only exported $198 billion of consumer goods. The imbalance added $404 billion to the deficit. America imported $359 billion worth of automobiles and parts, while only exporting $158 billion.

That added $201 billion to the deficit. So why is President Trump picking on the more strategically important primary metals so necessary for our defense and other manufacturing products, like automobiles that use steel and aluminum products and employ more than 6 million workers?

We should be taxing those imported consumer goods, or automobiles to bring down the trade deficit. But Americans love their cheaper imported consumer goods and automobiles.

Harlan Green © 2018

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