US Imposes Tariffs, And The 2018 Trade Deficit Rises: Lessons?

Early in 2018, President Trump began instituting a series of tariffs on international trade. As he tweeted in March 2018: "When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore - we win big. It’s easy!"

Last week, the US Department of Commerce announced the US trade figures for year-end 2018. After a year of President Trump's tariffs, the US trade deficit is larger in 2018 than it was in 2017. The bilateral US trade deficit with China is up, too. The government report notes:

For 2018, the goods and services deficit was $621.0 billion, up $68.8 billion from $552.3 billion in 2017. Exports were $2,500.0 billion in 2018, up $148.9 billion from 2017. Imports were $3,121.0 billion, up $217.7 billion from 2017. The 2018 increase in the goods and services deficit reflected an increase in the goods deficit of $83.8 billion, or 10.4 percent, to $891.3 billion and an increase in the services surplus of $15.0 billion, or 5.9 percent, to $270.2 billion. As a percentage of U.S. gross domestic product, the goods and services deficit was 3.0 percent in 2018, up from 2.8 percent in 2017. ... The deficit with China increased $43.6 billion to $419.2 billion in 2018. Exports decreased $9.6 billion to $120.3 billion and imports increased $34.0 billion to $539.5 billion.

Thus, a fairly common situation arises. A politician's claims that a certain Problem has a certain Solution. But when the politician is elected and the Solution is tried, the Problem is either the same or worse. It is rare for any politician in this situation to reconsider their Solution. Instead, the usual approaches are to argue that an even bigger and longer dose of the Solution is needed, or that the Solution was somehow sabotaged by poor implementation and political opposition.  

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