Maybe I'm missing something. It sounds like people have tacitly accepted the notion that Europe is somehow screwing the USA on trade deals. Is this even true? I don't recall even hearing about such an idea until recently, and it sounds to me like just more nonsense that Trump has made up. How has this been kept a secret all this while, if it was true?
That all depends on whether or not a trade deficit is automatically a bad thing. It seems Trump has been led to believe this is so...but it's much more complicated that
deficit bad/surplus good (it's a completely simplistic view in line with Trump's world view). Sorry to lay out so much data but, well you kinda asked for it :~)
Take this article from Forbes a magazine not noted for being a left wing progressive rag, right?
Mr. Trump, Here's Why Trade Deficits Are GoodPresident Trump seems to have the wrong end of the stick when it comes to trade deficits.
He seems to think big trade deficits mean the U.S. is losing in the game of international trade.. But nothing could be further from the truth. They are good: The bigger the better, in fact.
Here's what you need to know:
In 2016 the U.S. bought $347 billion more goods from China than it sold that country, according to U.S. Government data..
Sales competition?
It's easy to see why most people view that massive sum as a failure. On the face of it, a trade deficit between two countries means that one country exported way more goods than the other. For anyone who thrives on competition and sales, this must sound like losing. For the highly competitive Mr. Trump, that almost certainly appears just so, likely with the accompanying mental headline: "Chinese Win In Export Battle -- Sold More to the U.S. than Vice Versa."
But international trade isn't a sales competition, and the U.S. isn't losing. In fact, it's winning at something far more important than export sales.
Get the most, give the least
The idea with international trade is to import the largest volume of goods and services for any level of exports, as David Ranson, director of research at consulting firm HCWE & Co. has explained to me many times. The more goodies you get rather than give, the better off you are. In fact, this is just like life. Anyone with a job wants to trade the fewest hours possible for the largest volume of dollars.
All this means that a big trade deficit shows that you got more for your exports than did the other country. The bigger the deficit, the better your country came out in the trade deal. Clearly, the U.S. came out $347 billion ahead. That's awesome, but it's only part of the deal. It actually gets better.
China funds the U.S.
The deficit itself ends up being financed by the country with the trade surplus. In simple terms, China funds the huge U.S. trade deficit by lending money, currently at ultra-low interest rates. That means that China is helping finance the U.S. economy. That's a good thing.
It's also worth remembering that if the U.S. had a trade surplus with China, then its economy would be financed by the U.S., which wouldn't be nearly as good.
So, Trump is all riled up on what he thinks is bad, us importing more than we export...when in fact running a trade deficit means we're winning...
As it relates to Europe, here a page from the Office
of the United States Trade Representative, Executive Office of the President. Note, not sure if this has been updated in fact Robert Lighthizer was confirmed as President Donald Trump's trade czar only a few weeks ago so it doesn't look like the site has been updated or scrubbed...
European UnionThe U.S. economic relationship with the EU is the largest and most complex in the world, generating goods and services trade flows of about $2.7 billion a day [2012 estimate] and transatlantic investment is directly responsible for roughly 6.8 million jobs [2010 estimate]. This enormous volume of transatlantic trade and investment promotes economic prosperity on both sides of the Atlantic and in the dozens of other countries that trade with the transatlantic partners. The United States and the EU continue to pursue initiatives to create new opportunities for transatlantic commerce.
Key Trade and Investment Data and Trends
U.S. goods and services trade with the EU totaled nearly $1.1 trillion in 2014 (latest data available for Goods and Services trade). Exports totaled $495 billion; Imports totaled $587 billion. The U.S. goods and services trade deficit with the EU was $91 billion in 2014.
The United States had $699 billion in total (two ways) goods trade with the European Union during 2015, its largest Goods trade partner. Goods exports totaled $273 billion; Goods imports totaled $426 billion. The U.S. goods trade deficit with the EU was $153 billion in 2015.
Trade in services with the EU (exports and imports) totaled an estimated $388 billion in 2014 (latest data available). Services exports were $219 billion; Services imports were $169 billion. The U.S. services trade surplus with the EU was $51 billion in 2014.
According to the Department of Commerce, U.S. exports of Goods and Services to the EU supported an estimated 2.6 million in jobs in 2014 (latest data available) (1.2 million supported by goods exports and 1.4 million supported by services).
Exports
The EU countries, together, would rank 2nd as an export market for the United States in 2015.
U.S. goods exports to the EU in 2015 were $272.7 billion down 1.3% ($3.5 billion) from 2014 but up 46% from 2005. U.S. exports to the EU accounted for 18.1% of overall U.S. goods exports in 2015.
The five largest country markets were: United Kingdom ($56.4 billion), Germany ($49.9 billion), Netherlands ($40.7 billion), Belgium ($34.1 billion), and France ($30.1 billion).
The top export categories (2-digit HS) in 2015 were: Aircraft ($34.8 billion), Machinery ($30.7 billion), Pharmaceutical Products ($26.4 billion), Optic and Medical Instruments ($26.2 billion), and Electrical Machinery ($20.9 billion).
U.S. domestic exports of agricultural products to the EU totaled $12.1 billion in 2015. The EU countries together would rank 4th as an Ag Export Market for the United States. Leading categories include: tree nuts ($3.0 billion), soybeans ($1.9 billion), wine and beer ($685 million), and prepared food ($499 million),
U.S. exports of services to the EU were $219.3 billion in 2014 (latest data available), up 6.5% ($13.4 billion) from 2013, and 80% since 2004. Intellectual Property (industrial processes, computer software), financial services, travel, professional and management consulting services, and transportation services (including education) categories accounted for most of U.S. services exports to the EU.
Imports
The EU countries together, would rank as the 2nd largest supplier of imports to the United States in 2015.
U.S. goods imports from the EU totaled $426.0 billion in 2015, up 1.9% ($7.8 billion) from 2014, and up 37% from 2005. U.S. imports from the EU accounted for 19.0% of overall U.S. imports in 2015.
The five largest country suppliers of imports are: Germany ($124.1 billion), United Kingdom ($57.8 billion), France ($47.6 billion), Italy ($44.0 billion), and Ireland ($39.4 billion).
The five largest categories in 2015 were: Machinery ($70.2 billion), Vehicles ($58.8 billion), Pharmaceuticals Products ($53.2 billion), Optic and Medical Equipment ($26.9 billion), and Organic Chemicals ($25.9 billion).
U.S. imports for consumption of agricultural products from EU countries totaled $20.0 billion in 2015. The EU countries together rank 3rd (to Canada and Mexico) as a supplier of Ag imports to the United States. Leading categories include: wine and beer ($5.5 billion), essential oils ($2.6 billion), snack foods (including chocolate) ($1.4 billion), vegetable oils ($1.1 billion), and processed fruits and vegetables ($1.1 billion).
U.S. imports of services from the EU were $168.7 billion in 2014 (latest data available), up 3.8% ($6.2 billion) from 2013, and up 58% since 2004. Travel (including education), transportation services, and intellectual property (industrial processes, computer software), professional and management consulting services and research and development services categories accounted for most of U.S. services imports from the EU.
Trade Balance
The U.S. goods trade deficit with the EU was $153.3 billion in 2015, a 7.9% increase ($11.3 billion) over 2014 The U.S. goods trade deficit with the EU accounted for 20.8% of the overall U.S. goods trade deficit in 2015.
The United States has a services trade surplus of $50.6 billion with the EU in 2014 (latest data available), up 16.6% from 2013.
Yeah so we're running a
goods trade deficit with the EU was $153.3 billion in 2015 but a
services trade surplus of $50.6 billion with the EU in 2014
So, we're running a net -$102.7 billion deficit with the EU. By Forbe's logic, we're winning there too...
