Why The Trade Deficit With China Is Getting Worse, Not Better

Published 6:00 am Saturday, February 2, 2019

By John A. Tures






The overall U.S. trade deficit is growing, not shrinking.  And it’s getting worse with China.  The United States trade deficit with the People’s Republic of China just set a record, at $43.1 billion.  It turns out that tariffs are making the deficit worse, not better.  It’s not an accident either.  And such numbers will get worse with a trade war too.

Despite promises that slapping tariffs on Chinese exporters was going to reduce the trade deficit, the U.S. trade deficit with the world reached its highest mark in ten years, topping $55 billion.  And our trade deficit with China rose to its highest level ever.

We were told that putting taxes on China would reduce that deficit.  It would weaken the Chinese economy.  And that seems to have happened.  So why did the deficit go up?

Contrary to outdated economic thinking, hurting another country’s economy means that their consumers can buy less of our products.  That’s what’s hurting Apple and others who do business in China.  With less economic buying power, the Chinese are buying less of our stuff.  That’s why these companies have turned in such poor fourth quarter numbers, jolting investors, and giving our stocks the worst drubbing since the Great Depression.  Our President labeling himself “tariff man” only made things worse.

With the Chinese economy in trouble, their companies have to cut prices, making their products more of a bargain than our products.  This is why Democrats and Republicans were trying to make China revalue their currency…to make Chinese goods more expensive, and giving American companies a chance to compete.  That wisdom’s gone now, along with a lot of sales.

Others are starting to notice this.  The American Enterprise Institute, a conservative free market think tank, criticized our pro-tariff policies as hurting 6.5 million jobs from productions and trade, just to protect 140,000 jobs in the steel industry.

Moreover, the Chamber of Commerce, already disgusted with our government shutdown and our broken immigration system (their position has moved closer to the Democratic Party) published an article titled “Tariffs are the wrong approach.”  They have also published a score showing how tariffs hurt each state; Alabama, South Carolina and Pennsylvania are facing billions of dollars of exports being hit with retaliatory tariffs.

“Tariffs are simply taxes that raise prices for everyone,” said Chamber of Commerce CEO Thomas J. Donohue.  “Tariffs that beget tariffs that beget more tariffs only lead to a trade war that will cost American jobs and economic growth.”

After the disastrous tariffs and trade wars of the 1930s ruined America’s economy and those of West Europe, it gave rise to fascism in Germany and Italy as democratic countries were initially too weak to resist.  That’s why during the Cold War, Republicans and Democrats came together to support policies that reduced tariffs, or taxes that American people and companies pay on imported goods.  Tax-free trade helped strengthen all of our countries to combat the Russian regime and Chinese government enemies.

Those who never learned those lessons from free market economics or history cling to their tariffs, promising that they will help us “win” by reducing trade deficits.  Today’s trade deficit numbers have exposed those faulty big government policies for the empty promises that they are.