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Could you please explain why trade deficit is a bad thing?
Good question. I am not smart enough to articulate so I will borrow the information.
Before we talk about trade deficits, we need to start with the things that make up the trade balance. The trade balance is the difference between exports (domestically produced goods and services sold to other countries) and imports (goods and services purchased from other countries). Exporting goods and services produces income for a country; therefore, exports add to the trade balance, which in turn contributes to total Gross Domestic Product (GDP). Alternatively, when a country imports goods and services, it sends some of its income abroad to pay for them; thus imports detract from the trade balance and from GDP. When a country exports more than it imports (i.e., the difference between exports and imports is positive), the country is said to have a trade surplus. When the opposite is true, the country is said to have a trade deficit. When a country exports exactly as much as it imports, the country is said the have balanced trade.
The problem occurs because the U.S. Has to borrow money from foreign country to make up for the shortfall.
In other words, the U.S. has had to borrow from abroad since the early 1990s in order to finance this trade deficit. The money it receives for the sale of those assets has financed its trade deficit. Indeed, net financial inflows (net acquisitions by foreign residents of assets in the United States less net acquisitions by U.S. residents of assets abroad) were $657.4 billion in 2007
Not quite. You have to look at each individual trading partner. If you have a trading partner where you have a big surplus, certainly would not want high tariffs there, but where you are running a huge decifcit with a trading partner then you would want a tariff. It is not one size fits all. It actually takes a little analysis.
Good question. I am not smart enough to articulate so I will borrow the information.
Before we talk about trade deficits, we need to start with the things that make up the trade balance. The trade balance is the difference between exports (domestically produced goods and services sold to other countries) and imports (goods and services purchased from other countries). Exporting goods and services produces income for a country; therefore, exports add to the trade balance, which in turn contributes to total Gross Domestic Product (GDP). Alternatively, when a country imports goods and services, it sends some of its income abroad to pay for them; thus imports detract from the trade balance and from GDP. When a country exports more than it imports (i.e., the difference between exports and imports is positive), the country is said to have a trade surplus. When the opposite is true, the country is said to have a trade deficit. When a country exports exactly as much as it imports, the country is said the have balanced trade.
The problem occurs because the U.S. Has to borrow money from foreign country to make up for the shortfall.
In other words, the U.S. has had to borrow from abroad since the early 1990s in order to finance this trade deficit. The money it receives for the sale of those assets has financed its trade deficit. Indeed, net financial inflows (net acquisitions by foreign residents of assets in the United States less net acquisitions by U.S. residents of assets abroad) were $657.4 billion in 2007
Right. You are aware there are two components of the balance of payments correct? The current account and the capital account. That money comes back as a net positive financial inflow, as you can see $657.4 billion in 2007...so you act like there's something inherently wrong with it, when there isn't.
It certainly is not a new concept. We have been doing it since colonial times. Why did we all of the sudden decide to quit. The only way that we are going to be able to compete with countries like China is to put tariffs on imported products.
I certainly know the arguments agains such as higher prices at Walmart, but it would also mean more jobs. Paying lower prices is little consolation when you don't have a job.
The problem with raising tariffs on foreign goods is that other countries then raise tariffs on US imports, sometimes with devastating consequences. We didn't quit tariffs, we still impose many tariffs. But for the United States to be the global economic powerhouse that we are and are striving to continue to be, we had to ensure a global market for American made goods. Part of the reason some of our manufacturing went off-shore was because other countries restricted their markets to domestic manufacturers, and it was sound business-wise both to sell goods in those markets and to put people to work so that they would be able to buy in those markets.
The conundrum was that when it was cheap to transport those goods back to the United States, then the lower labor costs made shifting more and more manufacturing off-shore an attractive business decision. Not attractive to the United States, but we didn't assess penalties on those companies for such shifts, either, and manufacturing did what it has always done, gone where the labor is cheapest.
But competing with China is a false argument. China is a competitor, but China is learning about the same problems that the United States has been experiencing in recent decades. And the Chinese workforce, they want to keep up with the Joneses. Who are the Joneses? The American workforce. The Chinese workers, as they become more affluent, want what the American workforce had--they want the benefits, they want the material goods, they want nice homes, nice cars, nice vacations, nice retirements. Which drives up labor costs, and drives manufacturing to go elsewhere.
Right. You are aware there are two components of the balance of payments correct? The current account and the capital account. That money comes back as a net positive financial inflow, as you can see $657.4 billion in 2007...so you act like there's something inherently wrong with it, when there isn't.
This is debt. Do you not see anything inherently wrong with that?
Not quite. You have to look at each individual trading partner. If you have a trading partner where you have a big surplus, certainly would not want high tariffs there, but where you are running a huge decifcit with a trading partner then you would want a tariff. It is not one size fits all. It actually takes a little analysis.
What if the country we have the surplus with decides they do not like it and enacts tariffs?
The problem with raising tariffs on foreign goods is that other countries then raise tariffs on US imports, sometimes with devastating consequences. We didn't quit tariffs, we still impose many tariffs. But for the United States to be the global economic powerhouse that we are and are striving to continue to be, we had to ensure a global market for American made goods. Part of the reason some of our manufacturing went off-shore was because other countries restricted their markets to domestic manufacturers, and it was sound business-wise both to sell goods in those markets and to put people to work so that they would be able to buy in those markets.
The conundrum was that when it was cheap to transport those goods back to the United States, then the lower labor costs made shifting more and more manufacturing off-shore an attractive business decision. Not attractive to the United States, but we didn't assess penalties on those companies for such shifts, either, and manufacturing did what it has always done, gone where the labor is cheapest.
But competing with China is a false argument. China is a competitor, but China is learning about the same problems that the United States has been experiencing in recent decades. And the Chinese workforce, they want to keep up with the Joneses. Who are the Joneses? The American workforce. The Chinese workers, as they become more affluent, want what the American workforce had--they want the benefits, they want the material goods, they want nice homes, nice cars, nice vacations, nice retirements. Which drives up labor costs, and drives manufacturing to go elsewhere.
Some people seem to like the charts and graphs. I feel like Perot. As you can see on the chart below China is our biggest loss, but there are others. You certainly would not want to put tariffs on countries that are in the blue and maybe even not on those that are only slightly in the red, but on those with the big Red bubble...yes.
Our current exports come from a lucky few mega-corps, and that's about it. Mostly mechanized production that barely feeds our need for jobs.
So if you think I'd be against tariffs to save the likes of Ford, Chevy, and Dodge, or Lockheed Martin, you've got another thing coming.
Big auto is a failure. We need to let that go.
As far as defense goes, that's one industry.
Then comes Monsanto, Cargill, pharms, etc.
Companies I have no love for whatsoever, and would rather see'em burn.
On the other hand, when was the last time you were lucky enough to get your hands on a US made textile?
Even food is impossible to get these days. Everything is made overseas.
That's dangerous. When the products that are essential for every day living come from another country, that's a national security issue.
There needs to be a change, and tariffs will accomplish the task. There is simply no other way.
Guess you never heard of Hollywood, Microsoft, Intel, Apple, Bob Dylan, Caterpillar, General Electric, Citigroup, Cisco, and even good ole Mickey Ds.
Nah! We don't export squat.
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