Tag: US trade deficit

A BIASED 2017 FORECAST (PART ONE)

“The idea that the future is unpredictable is undermined every day by the ease with which the past is explained.” – Daniel Kahneman, Thinking, Fast and Slow

 

A couple weeks ago I was lucky enough to see a live one hour interview with Michael Lewis at the Annenberg Center about his new book The Undoing Project. Everyone attending the lecture received a complimentary copy of the book. Being a huge fan of Lewis after reading Liar’s Poker, Boomerang, The Big Short, Flash Boys, and Moneyball, I was interested to hear about his new project. This was a completely new direction from his financial crisis books. I wasn’t sure whether it would keep my interest, but the story of Daniel Kahneman and Amos Tversky and their research into the psychology of judgement and decision making, creating a cognitive basis for common human errors that arise from heuristics and biases, was an eye opener.

In psychology, heuristics are simple, efficient rules which people often use to form judgments and make decisions. They are mental shortcuts that usually involve focusing on one aspect of a complex problem and ignoring others. These rules work well under most circumstances, but they can lead to systematic deviations from logic, probability or rational choice theory. The resulting errors are called “cognitive biases” and many different types have been documented.

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THESE ARE THE COUNTRIES TRUMP WILL MAKE PAY

The simplistic solution to our trade deficits and outsourcing of American jobs to Asia is to slap 30% tariffs on imported goods. That is how Trump says he’ll bring back the jobs and make America great again. It seems China only accounts for half our annual trade deficit. A few other countries make up the difference. Trump would have to start a trade war with just about every major country in the world to bring back those jobs. We import $2.2 trillion of goods and export $1.5 trillion of goods. When Trump slaps that 30% tariff on those imports, what do you think the rest of the world will do regarding our $1.5 trillion of exports? One guess.

How will households who haven’t seen an increase in their real household income since the 1980s handle a 30% increase in the cost of virtually everything they buy? Do you think any domestic jobs might be lost due to the 30% tariff? Do you think inflation might go up a little? What about interest rates to offset the rising inflation? I wonder what that would do to interest on the $20 trillion national debt.

Simplistic campaign slogans sound good in theory. The reality might be a little more complex, with a few unintended consequences.

Courtesy of: Visual Capitalist

The United States has ran an annual trade deficit for 40 years in a row now.

Last year was no exception, and in 2015 the U.S. had over $1.5 trillion in exports while importing $2.2 trillion of goods. The resulting trade deficit was -$735 billion.

Today’s map from HowMuch.net, a cost information site, helps put this most recent information into perspective. Keep in mind that a trade deficit also means an outflow of domestic currency to foreign markets, as the U.S. is spending more money abroad than it is bringing in.

Here’s where that currency went:
(largest negative trade balances)

  1. China: -$365.7 billion
  2. Germany: -$74.2 billion
  3. Japan: -$68.6 billion
  4. Mexico: -$58.4 billion
  5. Ireland: -$30.4 billion

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Trump Is Right on Trade

Guest Post by Patrick J. Buchanan

Republican hawks are aflutter today over China’s installation of anti-aircraft missiles on Woody Island in the South China Sea.

But do these Republicans, good free-traders all, realize their own indispensable role in converting an indigent China into the mighty and menacing power that seeks to push us out of Asia?

Last year, China ran up the largest trade surplus in history, at our expense, $365 billion. We exported $116 billion in goods to China. China exported $482 billion worth of goods to us.

Using Census Bureau statistics, Terry Jeffrey of CNSNEWS.com documents how Beijing has, over decades, looted and carted off the greatest manufacturing base the world had ever seen.

In 1985, China’s trade surplus with us was a paltry $6 million. By 1992, when some of us were being denounced as “protectionists” for raising the issue, the U.S. trade deficit with China had crossed the $10 billion mark.

In 2002, it crossed the $100 billion mark. In 2005, the $200 billion mark. In each of the last four years, Communist China has run an annual trade surplus at the expense of the United States in excess of $300 billion.

Total trade deficits with China in the Bush-Clinton-Bush-Obama era? $4 trillion. Total U.S. trade deficit in 2015 — $736 billion, 4 percent of our GDP.

To understand why Detroit look as it does, while the desolate Shanghai Richard Nixon visited in ’72 is the great and gleaming metropolis of 2016, look to our trade deficits.

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