Trump still off key about trade

At the recent summit held in Europe of the seven richest countries, the G-7, President Trump trashed the German trade surplus, “The Germans are bad, very bad. Look at the millions of cars that they’re selling in the USA. Horrible. We’re gonna stop that.” German newspapers translated “very bad” as “evil.” Many "reputable" financial publications, including the Wall Street Journal, sang harmony with Trump. Here is a sample of the lyrics:

Germany’s current account surplus–the amount its exports outpace its imports–recently hit 270 billion euros, close to 8.9 percent of its gross domestic product. This upward trending trade surplus shows little signs of slowing and Germany’s current account balance may rise above 9 percent of its this year. Despite years of criticism from the Obama administration and the International Monetary Fund, Germany has shown no willingness to address the persistent imbalance.

Germany’s persistent current account surpluses add to German GDP while they subtract from the GDP elsewhere around they [sic] world. Germany is not just exporting products–it is exporting stagnation, job losses, and deflation.

Germany’s trade surplus with the U.S. is particularly large and damaging. It exports high-end manufactured goods to the United States–such as cars, auto-parts, chemicals and airplanes. Cars, for instance, make up more than 10 percent of its exports to the U.S. A more balanced trade in these goods would mean many more high quality jobs in the United States in regions that badly need them.

Trump's tariffs could sink Washington

Politicians have figured out that bashing China is a good way to attract vote. That’s why Donald Trump is doing it. It appeals to people who work and see jobs lost to cheaper products made across the Pacific. Hillary can’t appeal to those people because most of her constituency doesn’t work at all or works in government jobs that don’t compete with anyone anywhere.

But if Trump becomes president, as is likely, and he succeeds in raising tariffs on Chinese imports, he could destroy the federal government here’s why:

The federal government is spending about a trillion dollars per year more than what it takes in through taxes. That means it must borrow a trillion dollars. Who has that kind of money? The American people don’t because we don’t save enough and if we did we certainly wouldn’t loan it to that deadbeat Uncle Sam. Europe doesn’t have the savings. Japan has some but not enough. So most of what the federal government borrows comes from China.

Now the federal government requires US dollars, not Chinese yuan (officially the renminbi, but who can pronounce that?) No one can spend yuan in the US. Chinese save about 30% of their income, but in yuan. How can they get the dollars to loan to the US? They do it by selling stuff to US consumers for dollars. They sell those dollars to the Chinese government for yuan they can use in China to buy more Chinese made Cadillacs and ride their bullet trains. The Chinese government then uses those dollars to buy US debt and fund the US federal government deficit.