Since President Trump opened on January 20, it seems that many people – especially the chapters of gossip – have suddenly become experts in international trade. Mr. Trump’s tariff was born in a series of what is economist David Henderson It is called “Economics do it yourself.” These are economic ideas that reflect the intuitive concepts of ordinary people and do not condemn anything with the ideas created by coaches and economists. It is not surprising that Henderson has concluded that the gap between the concepts of job economics and the Orthodox economy is broader in the field of international trade.
This gap is clear in the current Brouhaha on trade and definitions, especially in the two opposition camps: responsible for drafting the agenda of the commercial administration (Mr. Trump and the Council of Ministers) and those who criticize it (commentators and journalists in the first place). The result of this dynamic is not only that the Trump administration has enacted the available commercial policies, but also that opposing these policies is largely ineffective or irrelevant. Both camps participate in the economies, do it yourself.
The misconceptions that emit from both camps from joint supervision stems: Mr. Trump and his critics themselves did not realize the identity of investment in savings, which is a basic but decisive mechanism that governs the volume of the trade balance of the country. In fact, by definition, the commercial balance of the country is fully subject to the gap between local savings and local investment. If the local savings of a country is larger than its local investments, such as China, it will record the surplus of trade. Likewise, if the country has a lack of savings, like the United States, it will record a trade deficit. The negative negative trade of the United States, which the country recorded every year starting in 1975, is “made in the United States”, as a result of its savings. To properly display commercial balance, the focus should be on the local economy.
As it turned out, one of us, Hank, analyzed the large and continuous trade deficit in the United States and found that they were Paid in the first place Through the large and continuous financial deficit on the levels of the federal and state government and the local government. In other words, in total, there is a shortage of savings in the United States, and the lack of savings from the public sector – the private sector is actually generated by a surplus of savings. This overall gap between savings and investment through foreign imports of goods and services, which leads to an easy -to -finance and a commercial disability surplus.
Armed with the basic truth of the investment identity, we are now moving to Mr. Trump’s camp. Mr. Trump and his advisers believe that the trade deficit of the United States is a result of the tearing of foreigners andBenefitFrom the United States. In fact, Uncle Sam is a victim of unfair commercial practices. It is clear that this description is wrong in two charges. First, the commercial deficit of foreigners does not result in; Instead, it is a local matter, as a result of the options that the Americans make (in total) to invest in a way that exceeds what they provide.
Second, the trade deficit is not necessarily harmful. Instead, it appears to be a privilege extending to Americans by foreigners who want to invest in American assets. This is a symbiotic relationship: Americans get cheap access to capital, while foreign governments and institutions get a safe place to stop their money and earn a return.
When it comes to commercial policy, the Trump administration’s critics are lost like the White House. Recently high -level condition In the New York Times –“‘Completely ridiculous. Trump’s focus on economic trade deficit “,” It contains a summary of what journalists and commentators say about the trade deficit. There is only one small problem in the article and its answers: No one explicitly mentions the true source of the trade deficit, which is reached by one of the most basic identities in the economy. Identity tells us that if savings are less than investment, the gap should be filled with a commercial deficit.
Each of the cabinets of Mr. Trump and those who criticize his policies have a fundamental misunderstanding of the American trade deficit. As a result, commercial debate has turned into a useless group, highlighting the risks of the economy you do. It’s time to return to the basics.
Steve E. Hank Professor Applied Economy at Johns Hopkins University and the author, with Liland Yiger, fromCapital, interest and waiting. Calip Hoffman is a research researcher at the Johns Hopkins Institute for Applied Economics, Global Health, and the Study of the Business Corporation.
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