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

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24 comments on Paul Krugman’s Blatant Hypocrisy on Trade Deficits and Trump’s Futile Trade Wars

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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

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 

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.

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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Mike Shedlock

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24 Comments
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Eddie_T
Eddie_T
4 years ago
Since he came on my radar in 2008, Krugman has mostly been a mouthpiece…first for Bernanke’s Fed, and since then for the socialist spending  policies of the Democrats. He’s another questionable expert in a world full of questionable experts that TPTB want us to take at face value. I have no real respect for anything he says. He simply says whatever the prevailing liberal narrative of the techno-aristocracy needs saying, and his Nobel means he gets to say it on the op-ed page of the NYT.
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PreCambrian
PreCambrian
4 years ago
I don’t think that Krugman is being hypocritical. He states his reasons right out front. Doing anything that appears to help China is a political loser at the moment. He would be hypocritical if Biden initiated any new tariffs on China and he didn’t criticize Biden like he did Trump. But I agree that putting politics above what is best and right for the country just digs us a deeper hole. I don’t see much way out of this mess unless the electorate gets smarter and is willing to put politics aside, which won’t happen for a long time.
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Maximus_Minimus
Maximus_Minimus
4 years ago
How is the deficit calculated? Presumably at factory gate prices.
In that case, lets take a piece of clothing which can cost $1 in China or Vietnam, and counts as $1 imports.
When it ends up on the store shelf, it could cost $50, and sold adds as much to GDP.
Imports subtract from GDP, but it is obvious that a relatively small value of imports has a much larger impact on overall GDP.
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KidHorn
KidHorn
4 years ago
Reply to  Maximus_Minimus
It, along with almost all economic numbers, aren’t calculated. They’re estimated. The trade deficit is an estimate of the dollar value of goods made in the US and sold to other countries vs the same thing imported.
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Maximus_Minimus
Maximus_Minimus
4 years ago
Reply to  KidHorn
Hats off to the estimators. Must be as good as actuaries.
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Billy
Billy
4 years ago
I import goods and wholesale them. Here is a breakdown of how the tariffs effect my trade:
32lb. box of 1-1/4″ coil roofing nails cost me about $15/box
They come 48ctn/pallet and 24 pallets fit in a 20′ container from China. 1,152ctns
Right now it costs me $25,600 to send the container from door to door freight.(China to Las Vegas)
Keep in mind, pre-pandemic it cost me $3,600.
There is no antidumping duty on this product but any other nail would be 60%
25% tariff=$3.75/ctn
Port processing fees=$800
Customs/Duties processing=$600
Total cost delivered to me $48,600 or $42.19/ctn
You can clearly see the inflation on this product is due to the price gouging of the freight. No one is even talking about this.
The 25% tariff =9% of the total cost.
BTW, wire rod from US manufactures cost $1,200/2000lbs. or $.60 per pound($19.20 for this 32lb. box) So you can see that the Chinese government is subsidizing this which warrants an antidumping claim. With the 25% tariff in place it makes it more of a wash.
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KidHorn
KidHorn
4 years ago
Reply to  Billy
If shipping costs stay this high, a lot of stuff coming from China will be made in the US.
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Billy
Billy
4 years ago
Reply to  KidHorn
I think that was one of Trump’s ideas for the tariffs.
Everyday when I read the news about inflation I try to read past the story to get an idea what our government is really wanting to accomplish.
For example, inflation is going to be the biggest threat for the Democrats on election day. So when I see stories about AOC claiming that inflation is caused from corporate greed, she is clearly blame-shifting. Or stories that inflation is a good thing, they are trying to get us to accept it.
Ultimately meaning that they are wanting it.
Deflation is their ultimate fear and if they just allowed any trucker into the ports and made them process the shipments 20% faster, the shipping costs would normalize within a couple of months. I know I would stop buying products knowing that if I waited 2 months they would be 25% cheaper.
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KidHorn
KidHorn
4 years ago
Reply to  Billy
AOC is a moron. The only reason anyone pays attention to her is because she’s the best looking woman in the house. Looking at the competition, anyone under the age of 50 has a shot.
There are so many things working against the dems, it’s hard to point a finger at any specific issue. if Biden’s reported approval rating is in the 30’s, the real number is probably in the 20’s. It appears, the current administration isn’t doing anything at all. Except claiming Russia is about to invade.
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thimk
thimk
4 years ago
Reply to  Billy
excellent , I was wondering if china had increased their prices . BUt it is the high cost  of freight and existing tariffs.  Biden should at least temporarily suspend tariffs  . Just curious though are you looking at USA/Canadian/mexico  sourced products ??
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Billy
Billy
4 years ago
Reply to  thimk
Yes. As far as nails go, there are 3 main US manufactures. One is owned by Diacero out of Mexico, one is Tree Island from Canada, and the other is American Fasteners which is owned by China.
I know you think Biden should at least temporarily suspend tariffs, but that’s only if he wants inflation to slow down. Suspending tariffs would also increase import purchases which would increase the need for more freight causing the freight to go even higher. At least the tariffs keep the money here and out of the pockets of the freight companies.
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LPCONGAS99
LPCONGAS99
4 years ago
Reply to  Billy
American Fasteners which is owned by China.  That about sums it all up right there
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LPCONGAS99
LPCONGAS99
4 years ago
Reply to  Billy
thank you. I prefer someone in the thick of it reporting on actual data than the ivory tower collegiate elites
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Felix_Mish
Felix_Mish
4 years ago
Reply to  Billy
That shipping cost, is that for getting the stuff over the Pacific, or from LA to Vegas?
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FlyNavy1
FlyNavy1
4 years ago
Paul Krugman has been a socialist hypocrite his entire career.  That said, he is an excellent counter-indicator.
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Karlmarx
Karlmarx
4 years ago
Reply to  FlyNavy1
Amazing the the moron got a Nobel prize for his trade research
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Mish
Mish
4 years ago
Reply to  Karlmarx
His Nobel prize was actually deserved.
Krugman was once a huge free trade advocate. 
He became a moron after he got it.
You would not recognize his early work. You would think I wrote it.
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vanderlyn
vanderlyn
4 years ago
Reply to  Mish
like greenspan used to be an austrian sound money man.   his achilles heal was he was an objectivist.   talk about cults of personalities.    his self interest obsession as an objectivist made him ditch his beliefs to rise to power with nixon………………
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Maximus_Minimus
Maximus_Minimus
4 years ago
Reply to  Karlmarx
Few probably know why he got it, but used it as a springboard for advocating unlimited money printing.
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ed_retired_actuary
ed_retired_actuary
4 years ago
Was there any enforcement mechanism or consequence to China specified in the agreement to increase imports from the US?  If not, why did the US expect compliance?
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KidHorn
KidHorn
4 years ago
China did not live up to their end of the trade agreement. I’m not a fan of tariffs, but blaming this solely on Trump is asinine. Biden is letting China get away with it. So, why is he not at least partially to blame?
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oee
oee
4 years ago
You are the last person that you should be talking smack. You have been predicting mass unemployment for the longest time because robots were going to take over.  Right now the unemployment rate is…4%. 
There have been a productivity jump since this expansion began but it was due to the pandemic not because of any technological innovations.
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Mish
Mish
4 years ago
Reply to  oee
I have no idea who you are talking to, but if me, you are on mars. 
I never predicted mass unemployment. Indeed I repeated many time the jobs would come, as they always have, but no one could say where.
Yes, I did predict the loss of millions of trucking jobs, and that will happen. But that does not mean permanent mass unemployment, something I never stated. 
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oee
oee
4 years ago
Reply to  Mish
Well, millions of unemployed truckers would mean mass unemployment becauese they truckers to spend money . So where are the driverless trucks? last time I heard the trucking companies are complaining about…a shortageo truckers.
Also, you have touting companies installing casheirless laners and orther automated services. 
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