
U.S. Goods Trade Deficit Declines to Smallest in Three Years - whack
https://finance.yahoo.com/news/u-goods-trade-deficit-declines-135204466.html
======
Animats
But not the lowest in 4 years. See graph.[1]

[1] [https://tradingeconomics.com/united-states/goods-trade-
balan...](https://tradingeconomics.com/united-states/goods-trade-balance)

~~~
rgbrenner
Not the lowest in 3 years either. It's actually just over 2 years:

[https://www.marketwatch.com/story/us-trade-deficit-in-
goods-...](https://www.marketwatch.com/story/us-trade-deficit-in-goods-
drops-54-in-november-to-a-26-month-low-2019-12-30)

------
ThrustVectoring
At the aggregate level, every trade deficit is a capital inflow. IMO, talking
about this in terms of capital flows is _far_ more illuminating - over the
last few decades, massive amounts of money has flowed into the US, primarily
seeking the perceived safety of the dollar. The narrowing of the deficit is
pretty worrying to me, since the privileged position brings a ton of benefits
to the US.

~~~
nine_zeros
That seems incorrect to me. Trade deficit means US is giving money to other
countries to buy their resources. Thus, it is capital outflow.

However, without this trade deficit, US dollar will start declining as the
major reserve currency. There just won't be as many dollars around in the
world for other countries to hold.

As you surmised, yes, that will be pretty bad for the US.

~~~
jotto
Can you expand on why it would be pretty bad for the US?

~~~
nine_zeros
Very good question.

Let's say that being a single nationalistic reserve currency gives inordinate
power in the hands of a few.

Some societal benefits are:

\- There will never be shortages or famines like the Irish potato famine. You
need potatoes, you print money and go get them

\- There will never be shortages of labor. You need services and companies to
support the massive infrastructure, you pay cheap labor and get them. This is
why even very small counties in the US can handle online utility payments
while it's not common in Germany or Japan

\- Any time there is a recession, just print money out of it without worrying
about inflation. For ALL other countries, the more they print, the lesser
their currency goes in valuation. Think Argentina, Asian countries. US has
been printing quite a bit as well but all those extra dollars don't cause
inflation. They just provide liquidity. The inflation is exported to other
countries. This is why so many countries have so many dollars in reserves now

\- This printing press minus the inflation is the reason the US nominal GDP is
so high. A haircut in US is the same as haircut in India. But a $70 haircut
counts more towards GDP than a Rs 70 haircut

\- This currency is also the reason why so many countries give visa on arrival
to US citizens. Those countries need dollars and they want to make it easy for
people to give it to them. The freedom to travel around the world with such a
strong currency is uniquely American. Perhaps only bested by the British in
the past

\- US currency goes through US banks. Which means it is under US purview. This
is how the US imposes sanctions on whoever they don't like. This is enormous
power honestly. Japan and Korea are in a trade war but they can't really
impose sanctions on each other as much as US on Iran.

Overall, being the reserve currency is an undue advantage that the US has. The
standard of living in the US is abnormally high because of it.

~~~
kerkeslager
I really don't know why you think we can just print dollars at will without it
causing inflation: if that was an option, we would, because it would be stupid
not to.

The US has been printing lots of dollars, with little inflation, because the
rate of demand has matched the rate of printing. But it would be easy to print
more dollars than are in demand, and that would cause inflation on the dollar
just like any currency.

> \- This currency is also the reason why so many countries give visa on
> arrival to US citizens. Those countries need dollars and they want to make
> it easy for people to give it to them. The freedom to travel around the
> world with such a strong currency is uniquely American. Perhaps only bested
> by the British in the past

This is nationalist nonsense. The US wasn't the strongest passport in 2019[1]
and hasn't been in the past 4 years[2][3][4].

[1] [https://www.atlasandboots.com/best-passport-to-
have/](https://www.atlasandboots.com/best-passport-to-have/)

[2] [https://www.telegraph.co.uk/travel/news/powerful-
passports-2...](https://www.telegraph.co.uk/travel/news/powerful-
passports-2018/)

[3] [https://www.telegraph.co.uk/travel/lists/most-powerful-
passp...](https://www.telegraph.co.uk/travel/lists/most-powerful-passports-in-
the-world/)

[4] [https://www.weforum.org/agenda/2016/09/how-powerful-is-
your-...](https://www.weforum.org/agenda/2016/09/how-powerful-is-your-
passport-2016-rankings/)

~~~
nine_zeros
How is the rate of demand for dollars growing?

Hint, global assets are all available for purchase on dollars. As more and
more products get built in China and other countries and they are all willing
to accept dollars for them, the rate of demand for dollars increases.

As for visa on arrival, most countries on it are similar GDP-wise. Which means
their citizens have a low cost to convert to USD and their capital accounts
are open so citizens can freely chnage into USD.

So their domestic currencies are almost as good as USD (or even Euros to some
extent)

~~~
kerkeslager
> How is the rate of demand for dollars growing?

> Hint, global assets are all available for purchase on dollars. As more and
> more products get built in China and other countries and they are all
> willing to accept dollars for them, the rate of demand for dollars
> increases.

This doesn't contradict anything I said.

Yes, I understand why demand for dollars is going up. No, that doesn't mean we
can just print dollars faster than demand and expect no inflation.

> As for visa on arrival, most countries on it are similar GDP-wise. Which
> means their citizens have a low cost to convert to USD and their capital
> accounts are open so citizens can freely chnage into USD.

So would it be fair to say that you're retracting your statement that this is
"uniquely American"?

------
sandworm101
How much of this is trade policy, ie politics, and how much is the changing
tech economy? The US has the strongest corporate IP protections. How much of
this shift is because the planet is spending less on physical items and more
on IP? Software instead of hardware? Downloadable movie licenses rather than
physical DVDs? That would mean Americans importing fewer physical goods and,
conversely, non-Americans sending more money into the US in exchange for IP
licenses?

Such changes look good at scale, but mean less to people on the ground. I'd
rather see someone in the US get a job building something than iTunes sell
more music overseas. The sale of IP doesn't trickle down to the shop floor as
quickly as the sale of physical objects. It's an economic reality we have yet
to properly address but one that can hide in such statistics.

~~~
thrower123
I'm curious how much the swine influenza epidemic in Chinese hogs plays a
factor. They have been hit hard, and that is a major protein source in their
food supply.

------
H8crilA
US net international investment position is a real disaster waiting to happen
(-$10T):

[https://fred.stlouisfed.org/series/IIPUSNETIQ#](https://fred.stlouisfed.org/series/IIPUSNETIQ#)

~~~
dweekly
Some very naive questions here from a layperson not skilled in macroeconomics:
what's going on here? What's driving this and why is this a problem? What do
you view as likely to happen?

~~~
H8crilA
This is "US holding foreign assets" \- "foreigners holding US assets". It's
the other side of the trade deficit (because if you're consuming more than
you're producing then inevitably there must be some imbalance created
somewhere).

Also being in the red here is often referred to as being a "debtor country".
US by far the greatest debtor country in the world at -$10T, next in line is
Spain with -$1T, so an order of magnitude less. Main creditor countries are
Japan, China, Germany.

As to what it means you can read Warren Buffet's article from 2003, it's still
relevant today (and the situation is far more advanced):
[https://fortune.com/2016/04/29/warren-buffett-foreign-
trade/](https://fortune.com/2016/04/29/warren-buffett-foreign-trade/)

Or Bob Prince from Bridgewater:
[https://youtu.be/DuTm1WA09uk?t=52](https://youtu.be/DuTm1WA09uk?t=52)

~~~
toxik
Can you please not post amp infected links?

------
quocble
No one understands economics.

------
resters
“Trade deficit” is an intentionally misleading term. It’s meant to suggest
that economic specialization via trade is a bad thing.

In fact, economic specialization is the main reason we progressed beyond the
simplest hunter gatherer existence.

~~~
stkdump
Why is it misleading? If you export as much as you import, then you have no
trade deficit.

~~~
resters
Right, but the number itself is useless. If you as a homeowner hire the
neighbor kid to mow the lawn, you have a trade deficit with him/her unless
he/she pays you to do some task for the same amount.

To say that it is somehow better to have no deficit in the above example is
just as absurd as applying the concept to international trade.

Also, trade is complex and involves many countries. Supply chains involve
imports and exports from many different countries.

To arbitrarily declare that trading flows should be symmetrical is simply a
political weasel meant to inspire people to support policies favoring
exporters over those that favor importers.

Bottom line: government meddling in trade is bad for everyone and makes
everyone worse off.

~~~
stkdump
This is not about a trade deficit with a specific country, it is about a trade
deficit with the rest of the world. It is as if you pay your neighbor kids
more than you make yourself.

~~~
resters
That sounds good in the same way that anti-vax rhetoric sounds convincing but
is actually not based in reality.

~~~
stkdump
Can you elborate on why? I just adjusted your example to what trade deficit
(as opposed to trade deficit with another country) actually means.

~~~
resters
Well, the logical argument is reductio ad absurdum:

Suppose the US has a trade deficit over the long term. This means that dollars
flow out of the US to other countries and goods come in.

How long can this continue? Why would it continue?

Anyone wishing to sell goods to Americans must be willing to accept dollars.
Why would anyone be willing to accept fiat money with no intrinsic value in
exchange for goods?

The only reason anyone would do this is if there was a widespread expectation
that the dollars would continue to have value in the future. Why would they?

Only if there would one day be US exports that would be purchased with these
dollars. Those transactions would reduce the trade deficit.

So the value of the fiat currency used to buy imported goods hinges upon the
eventual redemption of those dollars for American exported goods and services.

Sure, there are other uses for the dollars (sources of demand for dollars) in
the short or medium term, such as for underwriting capital, speculation, etc.,
but if the markets didn't expect the dollars to be redeemed, they would not be
used to accrue a trade deficit in the first place, since there would be the
expectation that they would be useless (valueless) in the future.

There is also a pragmatic argument:

You can draw a box around a moment in time or a small group of countries and
say "the US has a trade deficit and is worse off", but the question then
becomes _who_ in the US is worse off. If Americans import foreign manufactured
televisions, millions of Americans save money on a TV, and hundreds or
thousands (perhaps) don't find employment manufacturing TVs domestically.

Also, as a brief tangent, calls for domestic steel manufacturing with the goal
of protecting national interest are among the most absurd claims. Bulk steel
could be purchased and stockpiled by the government for a tiny fraction of the
cost of the protectionism. In essence, enough steel for 500 years of
skyscrapers, monorails and aircraft carriers could be purchased for the cost
of a few months of tariffs.

Economic specialization is what has elevated us out of the stone age. At scale
we call this trade. We draw arbitrary boundaries and call them countries and
declare "trade deficits", but any suggestion that someone has been harmed must
also acknowledge the many others who have benefitted.

The current administration has a highly nationalistic rhetorical strategy.
Historically, extreme nationalist movements are accompanied by calls for trade
protectionism, because the rhetoric sounds good. People who can't find work
find it easy to imagine that if only foreign manufactured goods were
manufactured domestically, there would be plenty of employment. In reality,
the factors that lead to economic specialization are not evenly or fairly
distributed. Some nations have more resources, cheaper labor, more skilled
labor, better infrastructure, better laws, etc. Production goes to the place
where it can occur most efficiently.

What's interesting to me about the current administration's nationalistic
rhetoric on trade protectionism is that there is no effort to talk about
fairness (working conditions, workplace safety, environmental externalities)
and a simple focus on dehumanizing foreign people. The anti-China trade
rhetoric is another way of saying "those people are beneath us", and it is of
course as ugly as the rest of the administration's rhetoric.

------
SlowRobotAhead
I’m still waiting on the doomsday trade war predications from last New Years.
I’m not a fan of any politician but it sure seems like the doom and gloomers
were wrong in this case.

~~~
yostrovs
I didn't support the trade war myself, but I listen to NPR and in the last few
months heard them do a number of stories about how the war is affecting
consumer prices and how we're all supposed to be impacted. Yet I don't notice
any inflation from the war at ground level. I don't think the listeners
noticed either. It seemed like the story was designed to point something out
that otherwise would have no impact on people.

~~~
chewmieser
I work at a company that sells mainly imported goods from China.

We ate most of the tariffs in 2019 but you can bet that most of our prices
increased in 2020 to reflect the tariffs.

So just wait a little bit longer...

~~~
mikeyouse
One more anecdote but a family member's company was put out of business due to
the trade war.. small shop, only a handful of employees sourcing factories in
China (and Honduras / Italy / Vietnam) for much larger US companies to produce
goods for sale worldwide. Think when a large US Firm wants to start producing
furniture or fixtures from speciality materials (brass, sustainably sourced
mahogany, etc), someone has to be on the ground vetting techniques and doing
QA. Sourcing in China had grown to be >50% of their business.

It's the type of thing that won't make the news but certainly devastating to a
group of hard working people. My family member had carved out a decent little
niche as a manufacturing specialist after the globalization wave off-shored
all production at the furniture company they had previously worked for.

~~~
SlowRobotAhead
One more anecdote... our company makes things entirely in the US by choice.
Our competitors bring knockoff garbage in from China, they have been hurting,
we’re doing very well.

~~~
mikeyouse
Which is great and commendable.. that's what the industry my family member
worked in used to be like. Until the decision-makers offshored it all and
decimated huge swaths of working class US. There are tons of people who don't
make decisions about this kind of thing trying to get by.

Maybe the trade war was worth it, maybe not, but there are real people with
their livelihoods on the line suffering the whims of some really apathetic
people.

I'm curious what industry is making things entirely in the US anymore? Even
something like a Tesla Model 3 is 50% non-US these days.

~~~
ThomPete
Cant we agree that shipping of jobs to china was wrong and that trying to
correct it is right? On more or less all metrics the economy is doing better
lowest paid salaries are rising faster then managers, people are starting to
save again, jobs are coming back. The trade war is necessary to save the US
economy from the same faith Europe is about to get if they dont start taking a
stance against china.

~~~
mikeyouse
Sure, If there’s something that can be done to level trade, let’s do that.
It’s just unfortunate that many of the same people whose industries were
ravaged by outsourcing had found ways to exist in the post outsourced world,
and were again ravaged by this new trade war.

Maybe that’s a necessary cost but it sure is a cost on the backs of people
who’ve already paid a lot.

Peter Navarro, who’s directing White House policy in China, was literally
hired by Jared Kushner googling for experts who were China critics and finding
his ‘Death by China’ book. He is essentially a crank with no academic support
and as soon as he was elevated to the national stage, people found substantial
fabrications in that book. I have next to zero faith that this crew is the one
who is going to right the trade ship.

~~~
ThomPete
What's your base for calling him a crank?

He literally predicted the issue with China and got no credit for it.

I don't see a single argument in your post.

~~~
mikeyouse
Aside from his many obvious and damaging fabrications that he has since
admitted. The crank reputation is the consensus of just about everyone, left
or right, in the international trade world. He doesn't even understand the
basics of macro, insisting somehow that reducing imports would increase GDP?

Noah Smith:
[https://www.bloomberg.com/opinion/articles/2016-12-28/trump-...](https://www.bloomberg.com/opinion/articles/2016-12-28/trump-
s-trade-chief-peter-navarro-makes-a-rookie-mistake)

Cato: [https://www.cato.org/publications/commentary/navarros-
trade-...](https://www.cato.org/publications/commentary/navarros-trade-views-
misguided-dangerous)

AEI: [https://www.aei.org/carpe-diem/donald-trump-and-peter-
navarr...](https://www.aei.org/carpe-diem/donald-trump-and-peter-navarro-the-
most-dangerous-man-in-global-economics-are-suffer-from-trade-deficit-
disorder/)

Krugman: [https://www.nytimes.com/2018/07/07/opinion/how-to-lose-a-
tra...](https://www.nytimes.com/2018/07/07/opinion/how-to-lose-a-trade-
war.html)

Kevin Williamson: [https://www.nationalreview.com/2017/04/peter-navarro-
trump-c...](https://www.nationalreview.com/2017/04/peter-navarro-trump-china-
adviser-bad-economics/)

> _I don 't see a single argument in your post._

I'm not really trying to argue about China policy.. just provide some context
to the people being impacted by the trade war any my skepticism of this
administration's ability to fix anything. We're two years into the trade war,
which we all know are "good and easy to win", so hopefully we get some
progress soon.

~~~
ThomPete
So you argument is pointing to someone who disagrees with him? Someone like
Krugman who repeatedly have been wrong on almost anything.

Why don't you point to something Navaro has been wrong about in the context of
this discussion.

Despite the trade war, the economy is doing great so it's a little puzzling
where you get your certainty about their inability to do this when they've
actually proved you wrong.

~~~
mikeyouse
I did point to something Navarro was wrong about, e.g. his insistence that
reducing imports would increase GDP, a mistake that a 1st year econ grad
student wouldn't make.

But as I've said about 4 times, I'm not trying to argue with you as I'm not an
international trade expert, which is why I referred to a bunch of people who
are, with my own personal anecdote of this trade war bankrupting a family
member's business. Maybe take a less confrontational tone though, it's pretty
obnoxious.

~~~
ThomPete
Sorry but you seem to be the one with the strong language calling people
cranks. The point was China though and it's ok if you don't feel you are in a
position to talk about that but then you don't really have a base for knowing
whether they make sense or not.

