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Paul Krugman's Blatant Hypocrisy on Trade Deficits and Trump's Futile Trade Wars

The US hit a new record trade deficit in December. Let's discuss blame and hypocrisy.
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Balance of Trade data from Bureau of Economic Analysis (BEA), chart by Mish

Balance of Trade data from Bureau of Economic Analysis (BEA), chart by Mish

Earlier this month the BEA reported the Balance of Trade deficit hit a new record deficit of $80.7 billion in December.

Exports, Imports, and Balance 

  • December exports were $228.1 billion, $3.4 billion more than November exports. December imports were $308.9 billion, $4.8 billion more than November imports.
  • The December increase in the goods and services deficit reflected an increase in the goods deficit of $3.2 billion to $101.4 billion and an increase in the services surplus of $1.8 billion to $20.7 billion.
  • For 2021, the goods and services deficit increased $182.4 billion, or 27.0 percent, from 2020. Exports increased $394.1 billion or 18.5 percent. Imports increased $576.5 billion or 20.5 percent.

Trump's Trade Wars 

Trump's trade wars certainly did not help. And I blasted Trump for that on numerous occasions. 

Trump's "Historical Trade Deal" With China Final Results Are a Big Zero

Chart courtesy of Peterson Institute for International Economics PIIE

Chart courtesy of Peterson Institute for International Economics PIIE

On February 9, 2022, I noted Trump's "Historical Trade Deal" With China Final Results Are a Big Zero

Free Trade, Anti-Tariff

I believe in free trade. And I do not believe tariffs work. The latter has been proven many times. 

Trump deserves chastising over his tariffs and trade deals. I said so on many occasions but I have never been hypocritical about it. 

Paul Krugman's Hypocrisy

Please consider what Paul Krugman has to say in Trump’s Big China Flop and Other Failures

Some economists have urged President Biden to help the fight against inflation by lifting the Trump tariffs — something he could do without congressional approval.

Unfortunately, it’s easy to see the political and strategic problems with doing this, no matter how much sense it would make. Trump may have been China’s chump, but Republicans would pounce on any action that could be construed as a gift to China, even if continuing Trump’s tariffs hurts us more than it hurts the Chinese government. 

I’ve called today’s newsletter a post-mortem on Trump’s trade war, but, in fact, that trade war isn’t over. Trump’s trade policies were foolish and costly — they failed by any measure you choose — but it may be a long time before any president is in a position to undo the damage.

Trade War Isn't Over

The trade war isn't over because Biden won't end it! 

Krugman even admits Biden could end the trade war without Congressional approval. But he won't.

Krugman tries to pin this the Republicans. Yes, many Republicans would object, but since when did Biden let that get in the way of anything? 

Biden's Lumber Tariffs 

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On November 24, 2021, the U.S. Commerce Dept. doubled countervailing duties on Canadian softwood lumber, placing tariffs of 17.99% on their imports. That is more than twice the 8.99% rate imposed during the Trump administration.

Even the liberal Washington Post could not stand it: Biden is hiking lumber tariffs at the wrong time

President Biden said this week he has “used every tool available to address the price increases” that have pushed inflation to a 30-year high. Not quite. One factor pushing up costs is the higher tariffs that President Donald Trump imposed on many imports. Yet instead of scaling them back, the Commerce Department just doubled the average tariff on Canadian softwood lumber from 8.99 percent to 17.9 percent.

This lumber tariff increase on one of America’s closest allies is particularly ill-timed and misguided. All of this is happening just as Mr. Biden is advocating for the biggest investment in decades in affordable housing in his Build Back Better plan. The stiffer duty will almost certainly lead to higher prices for new homes and heftier fees for renovating kitchens, decks and more.

Lumber Prices 

US lumber futures courtesy of Nasdaq, annotations by Mish.

US lumber futures courtesy of Nasdaq, annotations by Mish.

Trump started a trade war with China but Biden did nothing about it. 

Far worse, Biden escalated Trump's trade war with Canada, the United States largest trading partner, when home prices are going through the roof.

Ironically, the Washington Post noted the United States only produces about 70 percent of the lumber it needs. The rest is imported, tariffs or not. Is this crazy or what?

Synopsis 

  • Trump started huge trade wars that were doomed from the start
  • Biden mostly left those trade wars and tariffs in place 
  • Biden even escalated trade wars with Canada, our biggest trading partner
  • Hypocrites focus on one party only

Finally, Biden's pro-union pitch will do nothing but hurt any effort to bring manufacturing jobs back home. 

Amusingly, Krugman concludes "It may be a long time before any president is in a position to undo the damage."

Indeed, especially with Biden's inflation sponsorship every step of the way, not just via tariffs.

This post originated at MishTalk.Com.

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