Trump Exposes Own Kindergarten-Level Understanding of Economics Donald Trump has an absolutely ridiculous goal for his extreme tariffs. President Donald Trump said that he hopes to erase the U.S. trade deficit with other countries—but anyone who understands economics knows that wouldn’t be a good thing. “I spoke to a lot of leaders—European, Asian—from all over the world. They are dying to make a deal, but I said, ‘We’re not gonna have deficits with your country,’” Trump told reporters on board Air Force One Sunday. “We’re not gonna do that, because to me a deficit is a loss. We’re gonna have surpluses or at worst we’re gonna be breaking even.” A trade deficit isn’t a “loss,” regardless of what Trump thinks. A trade deficit simply means that one country spends more on goods from another country than that country spends on goods from them. Crucially, economists say that having a trade deficit is not an inherently bad thing at all, because the U.S. simply can’t and shouldn’t make everything. Trump’s insistence that the U.S. is being taken for a ride betrayed a fundamental misunderstanding of economics that is built on a dislike of other countries and a desire to be the dealmaker responsible for a new world order. Trump warned that it would be the “worst” for China. In 2024, the United States had a $295.4 billion trade deficit with China. Trump said that China would need to “solve their surplus” before he would be willing to make a deal on tariffs. The president predicted that his “reciprocal tariffs” would raise $1 trillion in the next year and that “thousands” of companies would relocate manufacturing to the U.S. China announced Friday that it would impose 34 percent tariffs on imports from the U.S. in response to Trump’s new “reciprocal” 34 percent tariff, which was added on top of two rounds of 10 percent tariffs that had been announced last month. https://newrepublic.com/post/193677/donald-trump-tariffs-deficit-understanding Trump’s announcement of “reciprocal tariffs” last week sent the U.S. stock market plummeting to its worst day since 2020, and major financial institutions updated their recession projections for 2025. But Trump merely compared the financial chaos to a sick patient taking their “medicine.” Trump was widely mocked for his ridiculous plan to eliminate the trade deficit. Tahra Jirari, director of economic analysis at the Chamber of Progress, wrote on X Sunday that “a trade deficit isn’t a ‘loss,’ it just means we import more than we export. Countries run trade deficits for all kinds of healthy reasons (like strong consumer demand). ‘Breaking even’ isn’t how global trade works.” Zeteo News’s editor in chief Mehdi Hasan wrote on X Sunday that Trump was “an ignoramus the like of which we have not seen in our lifetimes. Wharton must be so embarrassed.” Jonah Goldberg, editor in chief of The Dispatch, wrote in a post on X Monday that “Trumpers slavishly defend one man unilaterally screwing up the economy and the America-led global order because he’s some kind of genius. And it turns out—as was apparent for decades—he just doesn’t know what he’s talking about.”
Are trade deficits bad? No, economist says For decades, Trump has been arguing that trade deficits are bad. BUT - should we be eliminating trade deficits at all? Economist and Harvard professor Jason Furman says no. For decades, long before he was ever president, Donald Trump has been arguing that trade deficits are bad. And there he was yesterday at the White House, announcing a new set of steep, across-the-board tariffs that he says will help get rid of those trade deficits. But should we be eliminating trade deficits at all? Well, the economist Jason Furman says no. CHANG: OK, first, what is a trade deficit? Just define it for us. FURMAN: A trade deficit is when you pay more money to another country in exchange for the stuff you're buying from them than they pay you in exchange for the things that they buy from you. CHANG: OK. And then from an economist's point of view, then, is it bad for the U.S. to have a trade deficit? FURMAN: The one thing that is definitely not bad is trade deficits with any individual country. Even if overall we didn't have a trade deficit, there would still be some countries where we really love their products and we need them and so we have a trade deficit with them and some other countries where it's the opposite. So right now, Brazil buys a lot of energy stuff from the United States, so we have a surplus with them. France makes a lot of food and chemicals that we need here in the United States, and so we run a trade deficit. Overall, if the trade deficit is really, really large for a really long period of time, it can be unsustainable. Don't think that's where the United States has been. CHANG: OK. And just to bring the tariff piece into all of this, it is true that the U.S. has had lower tariffs on imports than most of the countries that it trades with. And to President Trump, that's just unfair. But has the U.S. gotten anything in exchange for those lower tariff rates? FURMAN: Yeah. Tariffs are a tax on yourself, so it's not obvious that you want them to be higher. What are the countries with high tariff rates? They're places like North Korea, Venezuela. I don't think we want to emulate them. I think we'd like to be more like the rich, dynamic countries, like, say, the United States, which has benefited from its openness to trade. Moreover, other rich countries actually have quite similar tariffs to the United States. Most of them have 1- or 2% on us, we have 1- or 2% on them. It is true the Chinas and Indias of the world have higher tariffs, but their tariffs are, like, 6% on the United States while ours were 1% on them. So we'd only need to raise tariffs by a few percentage points if we even wanted to match them, not that I think that should be our goal. CHANG: OK. Well, if I may push back just a little bit, I mean, trade deficits are not always great in all aspects, right? Like, the U.S. has lost huge numbers of manufacturing jobs. And we're talking about well-paying jobs for people without a lot of education. Trump says the tariffs will help bring back those kinds of jobs. Why isn't it worth it to give it a try, even if tariffs might mean slightly higher prices and lower profits? FURMAN: First of all, the United States is producing more than it's ever produced in manufacturing, it's just doing it with less people. And that's because of the enormous increase in productivity growth. But let's say you wanted to use trade policy to bring manufacturing jobs back. You wouldn't do what the president just did, which is to put tariffs on all the bananas, mangoes, avocados and coffee coming into the United States. Those just aren't things that we're really ever going to make at enormous scale. Moreover, the types of things that they do in Vietnam - you know, making clothing, making shoes - that's not the jobs that we should be aspiring to have in the United States. We don't want to give up jobs making airplanes in order to have more jobs making shoes. Finally, these tariffs themselves, I think, will likely end up hurting manufacturing, not helping it because they blow up global supply chains, raise the cost of inputs to American businesses, and our businesses are now having to deal with tariffs in lots and lots of other countries in retaliation for what we've done. CHANG: So with tariffs increased at the scale that President Trump wants to increase them, what do you see is going to be the outcome? FURMAN: Almost every economic forecaster has lowered their forecast of growth quite a lot. Most are not predicting a recession, but you never know. Almost every economic forecaster has raised their forecast for inflation, and American families should expect to see higher prices, basically starting almost right away. Over the longer run, if something like this lasts, I expect us to have basically worse-paying jobs as we have more people working to make shoes and T-shirts for Americans and fewer people making airplanes and tech products for export. CHANG: Jason Furman with Harvard University. Thank you very much for joining us today. FURMAN: Thanks for having me.
We aren't creating a future of prosperity and Anyone who believes these tarriffs are a way to bring manufacturing back to the US are fools. There will never be a manufacturing boom here in the US....its all wishful thinking.....
I honestly don't quite get why some people have a hard time understanding that a large part of our supply chain depends on cheap labor, eg Chinese manufacturing wages - of the top of my head so don't quote me on that haha - but sthg like 4x lower than guys doing the job here... So how is that supposed to work without either guys here going way down on wages, OR consumers spending 4x more ? Thats the catch-22 that needs to get solved before anyone is bringing manufacturing back home again.
It does depend on cheap labor, once the US got a taste of importing cheaper goods from China is was over for any business to create a factory here in the US to produce goods they knew would be too expensive to produce to compete so they did what all the others did, outsource it to China and reap the profits. And it's funny, no one comprehends that even if we start manufacturing here in the US that most of rhe work would be completely automated. This isn't 1938 or 1955, everything will completely automated and AI driven, so anyone thinking it will create jobs, it wont....these factories would be completely run by AI and completely automated. So where would all these new jobs come from in this whole scheme of things...its nothing but political garbage ...
And jobs is where a lot if not most of the discontent that fuelled maga came from right, folks remembering their parents or grandparents working factory lines but still having a darn good standard of living with three cars out front and so on...
It's extremely true so when they talk about how many jobs it will create, they are literally lying to your face. Everytime i hear these fools speak about bringing "jobs" back to America i laugh because the only thing they will bring back is no jobs and US consumers paying many more pennies for products made here in America.
You must have lost tons of $$$$. Seems like everyday is a bad day for you. All your new threads is about negative things. You and @S2007S can be very good buddies. It doesn't matter whether Trump has level 1 or Phd in economics. But professor in Economics better have a Phd in economics. As long as he provides trading opportunities, we traders are happy. And traders just need level 1 economics. We don't want to suffer from DATA ANALYSIS PARALYSIS DISEASE.
It's all a shakedown. They're asking for payments to *Trump*, not the US. That's why they systematically reject offers of 0% tariffs.