On Twitter today, President Donald Trump took a break from his usual fighting with Europeans about trade to pick what I guess he thinks is a fight with China over trade policy. Specifically, Trump wants us to know that he is getting tough and demanding a plan to reduce the US-China bilateral trade deficit by $1 billion.
Trump’s trade demand to China is pathetically small
The US-China trade deficit rose $28 billion last year. Trump is asking for a $1 billion cut.
The problem here is that in Trump’s first year in office, the US-China trade deficit was $375.2 billion — well over $1 billion per day. That was a hefty increase from the $347 billion deficit we ran into 2016.
If you ask most economists, they will tell you that running a bilateral trade deficit with China is not a big problem. Indeed, running a worldwide trade deficit is not really a big problem now that the unemployment rate is low. America’s trade deficit with the world reflects the fact that the US is an attractive destination for foreign investment — something we ought to be proud of — which means we can afford to buy lots of foreign-made products.
But be that as it may, the point is that a $1 billion reduction in the bilateral relationship with China would be a drop in the bucket. This figure regularly fluctuates up and down by $10 billion a year for no particular reason. Trump is asking the Chinese to find a way to cut it by less than 0.27 percent but acting like he’s a tough guy.
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