The US Trade War Is Increasing The US Trade Deficit

This isn’t how mercantilists hope things will work out of course. But it would appear that a trade war can actually increase the trade deficit. Something not greatly desired by said mercantilists, given that they institute trade wars in order to reduce the trade deficit.

But we’ve been having Donald Trump’s attempts at a trade war with China for some time now. And the US trade deficit is rising. So, well done there Donnie:

Feeds exports – that could be some part of the trade war effect. China has certainly said that it will preferentially buy more US-grown soya, for example. But those effects are, compared to the general effects of differential growth rates, small. For the truth is that the US is growing rather faster than all of the other major economies other than China. The eurozone is still only just marginally above recession, for example. So, the US is sucking in imports in a manner in which the roughly equivalent-sized economy in Europe isn’t. We’d just expect the US trade deficit to be rising in such circumstances.

Sadly, it doesn’t seem that the trade deficit is growing because of the trade war, that would just be too perfect.