With Donald Trump facing government and media pressure for his unusual behavior in Europe as well as with the ongoing Russian probes, we at least can interpret his views about Germany and the Eurozone and regarding the Paris Accords on climate change. It is possible to see where he is right and where he is wrong, and where he has no solution other than what could be considered a hostile act. 

Donald Trump is partially right about Germany. Germany does use the Euro as a hammer to increase trade. If we were dealing with the German Mark, it would be stronger than the Euro, and Germany would not be able to dominate trade like it does. 

However, there are other issues at work with the German trade deficit and with trade deficits in general that make the issue more complex. Asset prices and inflation are affected by trade policy. There are pros and cons to US running trade deficits.

But before going into that discussion and into discussing the Paris Accords, here is a definition of balance of payments and the short and long term effects:

A balance of payments deficit means the country imports more goods, services and capital than it exports. It must borrow from other countries to pay for its imports. In the short-term, that fuels the country's economic growth... ...In the long-term, the country becomes a net consumer, not a producer, of the world's economic output. It will have to go into debt to pay for consumption instead of investing in future growth. If the deficit continues long enough, the country may have to sell off its assets to pay its creditors...

The US trade deficit with the world, for goods only, was 750 billion dollars in 2016. However, the US also exports services. The trade surplus for services was 248 billion dollars, cutting the total trade deficit to 502 billion dollars.

Almost 1/2 of the trade deficit is with China. The German trade deficit in 2016 was 63 billion dollars.

Zachary Karabell made the case back in 2014 that IPhones add 6 to 8 billion to the trade imbalance with China, but that each IPhone only leaves $10 for the Chinese economy. Most parts are made elsewhere, and the design is done in the United States. He is arguing that the trade deficit with China is not as bad as it looks.

Clearly, the benefits of trade deficits come to the United States in two ways.

1. First, the design of the product and some parts manufacturing is located here.

2. Dollars that are sent offshore are called Eurodollars. They are used to reinvest into the United States. But what they are often reinvested in is assets. The reserve currency that is the dollar does benefit the elite. But, it also helps the Fed keep asset prices from declining uncontrollably, which would put credit in jeopardy.

Unfortunately, that does impact the cost of living for workers in the USA. The importance of keeping asset prices from falling due to the danger of a credit crisis occurring is often understated, because it is not a popular effect on main street which would like to see prices come down, especially with regard to buying houses.

The US has the reserve currency, and that protects America from product inflation and could protect against credit crises. However, it does not protect America from asset inflation at home.

Here is an example: I know people who make salaries that would put them in the top 2 to 3 percent in America, who cannot afford to buy houses along the California Coast where they work. Dollars are flooding back into the United States to that area. Real estate prices are soaring. Yet there is something wrong with top wage earners not being able to buy houses where they live. It just doesn't seem right. And it seems unbalanced.

So, rises in the value of assets coupled with job losses nationwide can ultimately take its toll upon the United States. At least one good thing about the IPhone is that some parts are made in the United States which creates jobs. According to Karabell:

More than a dozen companies from at least five countries supply parts for them. Infineon Technologies, in Germany, makes the wireless chip; Toshiba, in Japan, manufactures the touch screen; Broadcom, in the U.S., makes the Bluetooth chips that let the devices connect to wireless headsets or keyboards.

But as for Donald Trump and his apparent dislike of supply chains, his attempts that may come to disrupt them by attaching tariffs is not the real fix for Germany. The only way to fix Germany would be to dislodge it from the euro somehow.

I don't think Donald Trump wants to go that far. Any attempt to dislodge the Euro and Eurozone would be seen as a hostile act against friendly nations.

So, since it is likely he isn't interested in taking down the Eurozone, the Trump fix for the German euro advantage would just hurt business and investment here and make the business between the two nations that much more complex and limited.

It appears that Donald Trump is torn by the complexity of the issues, as are many Americans. He endorsed the new Boeing superliner, which has a supply chain that must be maintained:

As Business Insider said, the Dreamliner is like the United Nations of planes:

• Its wings and batteries come from Japan.
• Its wing tips come from South Korea.
• India is the source of its floor beams.
• The front fuselage is made in the US and Japan.
• The center fuselage and horizontal stabilizers are from Italy.
• Landing gear and doors? France.
• Cargo access doors are built in Sweden.
• The wing/body fairings, which cover gaps on the body, are from Canada.
• The movable trailing edge of the wings are from Canada, except when they're from the US or Australia.
• Thrust reversers come from Mexico.
• Its engines come from either General Electric in the US or Rolls-Royce in the UK.    

Donald Trump and his minions must tread lightly and thoughtfully when it comes to trade.

So, is POTUS's blustering frustration that embarrassed us during his Europe trip in May, just blowing off steam, to pretend to satisfy his base of voters? Withdrawing from the Paris Accords may be a more serious attempt to appease his political base.

The Paris Accords plan the destruction of fossil fuels. This is from a world economic standpoint, a bad idea. One wonders if the Paris Accords have more to do with weakening Russia, the most powerful adversary most dependent on oil exports. One would think that the Paris Accords are just another way to idle millions of people, excluding them from the work force, from prosperity, and even from national security in many nations. 

Russia signed the accords, but will likely not ratify them. Certainly, Russia wants to appear cooperative over climate change, but it would not be difficult to see Russia view the accords as a conspiracy against fossil fuels and hence, against Russia itself! 

There are pros and cons to the economic nationalism that Trump is trying to implement. The globalist world will be dead set against all of it. Most people in America fear climate change. The ball is rolling downhill towards the destruction of fossil fuels and of jobs and of the purpose of many nations. 

Among the globalists who want fossil fuels retired are those who want a culling of the world population. Economic nationalism is a bad idea for the economy when it comes to tariffs. But perhaps economic nationalism a good idea when it comes to slowing down the movement to rid the world of fossil fuels. 

This critique of Trump economic nationalism is not an endorsement of the economic new normal we are stuck with now. It is just that we are stuck with it going forward, with seemingly no safe way out. Steve Bannon wants to bust out of the new normal, maybe more so now that the investigations are piling up.

The poor response of the Fed to the credit crisis, where they left small and medium sized businesses dangling in the wind, without proper avenues to affordable credit, has given rise to much of this economic nationalism. The hearing cited above was summarized this way:

So let me conclude. In conclusion, since last fall, credit supply conditions have almost surely tightened for the vast
majority of small businesses. On balance, however, credit appears to be generally available, but at a higher cost. Thank you.

That hearing took place in Spring 2008. Credit to small and medium sized business got absolutely worse as the year went on. Then, mass layoffs occurred towards the end of the year. And finally, banks offered credit cards instead of affordable loans that kept many businesses going and 2009 proved very difficult for small biz.

The Fed must do better in a future credit crisis.

The disappearance of well paid blue collar jobs over the past 20 years has not helped stem the tide of economic nationalism, either. The Paris Accords could destroy many more blue collar jobs. They could drive a stake through the heart of that huge part of America not sharing in the prosperity tech revolution. Most Americans only look at climate change and not at the destruction these accords could have on the heartland of America. 

These are complex issues. I know there is climate change, and glaciers all along 395 in the Sierra Nevada have experienced massive loss. I have driven that area many times and have talked to long time residents who affirm global warming. So, most all Americans, I am torn, not sure the economic cost to the world is worth the destruction of the fossil fuel industries that employ so many people. 

It is hard to trust Donald Trump's vision of the world, but I am equally uncomfortable with Tesla's Elon Musk's vision for the world and his commitment to the destruction of fossil fuels.