There’s foolish and then there’s macroeconomics. Macroeconomics insults foolish.
Was “economics” always this dense? Acknowledging that there’s no empirical way to answer the previous question, it will simply be said that the answer is yes exactly because “macroeconomics” has been around a long time. And it’s a fraud. Economies are people, which means there’s only microeconomics.
What the individual/microeconomic truth indicates is that people produce to get. And their getting mirrors what they produce. Translated, trade by its very name implies balance. If you want something or many things, you must produce something or many things first.
What the above explicitly tells us is that when economists fight over the good or bad of “trade deficits” with presidents, they’re fighting a mirage. There’s no such thing as a trade deficit. By extension, there’s no such thing as importing more than exporting. There’s only balance.
What creates the false impression of imbalance is great American companies. About them, economists who correctly argue we shouldn’t worry about what’s a mirage (“trade deficits”) insult their argument with the nonsensical assertion that an “insufficiency of savings” in the U.S., one that’s made up for by global savings, is what creates the mirages. Wrong.
Americans are prodigious savers. See the staggering size and wealth of the financial services sector stateside, and that exists largely to intermediate the savings of the American people. American savings are an effect of their remarkable ability to produce. Their production is so impressive that the rest of the world’s savers want to put their savings to work alongside Americans in the world’s greatest companies: American companies.
Americans don’t export more than they import, rather the shares of American companies are a major, albeit uncounted U.S. export. It’s a reminder that no matter what President Trump does, he’ll rebalance nothing (contra his cheerleaders and critics) simply because trade is balance. That’s not changing.
What might change is the ease or cost associated with exchanging production. That’s unfortunate, and it’s a comment on a known: a tariff is a tax on our work. We once again produce to get, and the tariff raises the cost of getting.
To which some will say the “rebalancing” Trump is achieving or foisting on the world is the rest of the world not the United States taxing their citizens less when they purchase American plenty. On its face it’s appealing, both for American producers and those lucky enough to attain American production in tax-free fashion.
At the same time, Trump’s alleged goal of lower foreign tariffs on American goods raises a question: Why would Trump injure the American people as a way of perhaps convincing other countries to stop injuring their own people? We’re already the winners, get it?
Notable for us winners is that we haven’t just benefited from near frictionless inflow of global production. That’s the getting part, but never forget that production always and everywhere precedes the getting. Open markets greatly enhance the odds of Americans being able to do what they do best while importing the fruits of others doing what they do best. Translated, open markets free us to be productive, and it’s our productivity that’s such a magnet for foreign savings.
Which means President Trump won’t rebalance anything simply because there’s nothing out of balance to balance. There’s just Herculean importing for global production in return for Herculean American exports that include shares in the world’s greatest companies, and that create a mirage that continues to trip up Americans of varying ideological flavors.
