Trump's Tariffs Didn't Reduce the Trade Deficit. Why Would They Work Now?
Donald Trump's latest argument for protectionism is undermined by the realities of his own trade policies.
In a letter to The Wall Street Journal's editorial board, former President Donald Trump argues that more tariffs are needed to reduce America's trade deficit, which has grown to a record high under the watch of President Joe Biden.
"Under Joe Biden, our trade deficits, also known as losses, have hit record highs," Trump wrote, in response to the Journal's criticism of his plans for higher tariffs. "Since 2000 the U.S. has racked up $17 trillion in cumulative trade deficits with the world. Only a fool or a fanatic would dismiss these facts as irrelevant."
But only a fool or a fanatic could ignore the fact that we've already witnessed how raising tariffs doesn't reduce the trade deficit, which is the gap between the total value of a country's exports and imports. Trump's latest protectionist proposal is undermined by the reality of Trump's previous trade policies—and the fact that Biden has largely left them untouched since taking office. If America's trade deficits are determined by the policies of the current president—a very iffy claim, but the one Trump is making—then the former president is equally responsible.
The numbers don't lie. America's trade deficit was $49 billion in March 2018, the month Trump announced his trade war and started hiking tariffs. By August 2020, the trade deficit had hit a 14-year high of $67 billion. The deficit has hovered around that same level ever since: It rang in at $65 billion in June, the most recent month for which data are available.
That increase in the trade deficit occurred alongside climbing tariff rates. The average tariff rate on imports was about 1.5 percent when Trump took office. Today, it's over 3 percent. That's due to Trump's tariff increases, and Biden's unwillingness to reverse them.
Those figures ought to raise an obvious question: If tariff rates have increased and the trade deficit has grown, why would yet higher tariffs work to reduce the gap?
Trump's fixation on the trade deficit is not new. He spent much of the 2016 campaign and a significant amount of time during his four years in the White House complaining about the deficit, which he argues is evidence that foreign countries are somehow ripping off American businesses. (That's wrong, but let's not worry about that for now.)
In fact, there's significant evidence that Trump's tariffs actually added to America's trade deficit. That's because one of the consequences of higher tariffs is a reduction in exports, and fewer exports will make a trade deficit grow.
But the main reason why the trade deficit has grown in recent years is that Americans are choosing to buy more stuff from abroad. There is absolutely nothing wrong with that. Trump's tariff plan amounts to a massive tax increase on Americans whose decisions the former president doesn't like.
The size of the country's trade deficit—like many other economic indicators—is largely beyond the power of a president to control. But if Trump wants to judge the current chief executive by the size of the trade deficit, he should have to answer for the same critique.
