Quote:
Originally Posted by Supposn
SkyDog77, you continue referring to finances. I doubt if any individual item of our federal budget should be essentially considered as a “trade deficit” item. USA’ chronic annual trade deficits detrimental impact upon our economy and society is the lesser than otherwise USA numbers of jobs and wages that are due to our trade deficit.
You do not actually run a trade deficit with your barber. Should your time in the barber’s chair reduced your income or prevented you from attending to your job, we might then consider that as somewhat analogous to a trade deficit’s effect upon our economy.
Respectfully, Supposn
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I spent some time reading about this concept you posted. You can't tell me that you are against tariffs. This is a tariff. It makes it more expensive to purchase goods from outside the country. The wikipedia page even calls it a form of tariff. Either you don't understand tariffs or you're being dishonest.
The vast majority of macro-economists do not believe that trade deficits are detrimental to GDP.
Yes, GDP=Consumption + Investment + Government Spending + Net Exports (Y=C+I+G+NE), but when you implement a tariff - and make no mistake what you are proposing is a tariff - you do not boost output. Several things happen when you implement a tariff:
- Trading partners impose reciprocal tariffs - Net exports end up being harmed proportionally to the reduction in net imports so the Investment/Savings (IS) Curve may not shift to the right
- The disruption created makes your economy less efficient and can shrink long run aggregate supply (Y)
- The uncertainty created reduces the amount of capital firms are willing to invest (happening right now.) IS curve shifts left.
Also very important to note that in an open economy, if we implement a unilateral tariff (no reciprocal tariffs) and our IS curve does shift to the right as you hope it does, our interest rates will also go up compared to our trading partners. When this happens, the value of US currency compared to theirs also goes up. That, in turn, makes it cheaper for us to buy their stuff and more expensive for them to buy ours, thus offsetting the goal of the tariff. IS curve shifts back to the left.
Goldman Sachs has done quite a bit of analysis on the impacts of tariffs if you are really interested in this stuff.
https://www.goldmansachs.com/insight...3.0/report.pdf
The last model I looked at showed that the implementation of a tariff shrunk consumption, investment, exports, and imports. The trade imbalance shifted fractionally, and Real GDP also shrunk fractionally.
I actually do run a trade deficit with my barber. I pay her for something and she does not pay me for anything. I run a surplus with my tenants. They pay me rent, I don't pay them anything.
Your premise that if we were not buying from China, we would automatically boost GDP in that amount is countered by the data. I know this is a tough concept to wrap your head around, but it is not like that money magically appears here without cost. We are part of a global economy. You can't pull one lever without it affecting others.
Edit: Another good read -
https://www.andrewleunginternational...trade-wars.pdf