I was a bit surprised by CNN’s Jim Sciutto’s seeming ignorance of foreign trade. He was completely justified in his contempt for Trump’s constant whining about how unfair are so many countries that sell more goods to the US than they buy. Sciutto reflected that maybe they (other countries) just produce goods “more efficiently” than in the US. Not at all. That the US produces goods more efficiently is the reason that there aren’t bigger trade deficits and that with some countries – Britain, Australia, Brazil – there is a US surplus.
There are two reasons for our overall trade deficit. First, a strong dollar. What does this mean? Having moved to Poland from the US, it is easy for me to understand, and most people don’t. But I think that a newsman should if he were going to comment about it on national TV. Let’s assume the dollar is stronger than the Polish currency, which it is. You take a dollar, go to the store and you can buy 3 chocolate cookies – or 3 widgets.
You take a dollar and hop on a plane to Poland where you exchange the dollar for the Polish currency. You go in a store and find you can buy 5 chocolate cookies, or 5 widgets for the dollar’s equivalent in Polish zloties. Hey, this is good! The dollar is stronger than the Polish currency. (This is the reason some retired Polish-Americas move back to Poland – their retirement buys more.) Therefore Polish im/exporters, naturally looking for the greatest profit, find that buying from the US isn’t the best deal. Better to sell to them.
The second reason for the overall trade deficit is the American consumer. The top half of the US population represents the richest, most consuming, most spending, society in the world. The US per capita income is $89,100. That of China is $13,800. Much of our high standard of living comes from foreign goods. If I buy a new pair of Mexican socks, my standard of living goes up. I’m happier with new, colorful socks. By Trump’s idea, the US just got cheated out of 20 dollars by Mexico. He crowed that under Bidem, the US “lost” 5 million dollars a day. MAGA people of course gasped and shook their head at such prodigality. Of course it was just more Trump disinformation.
In summary, no, the overall trade deficit is not due to Americam inefficiency. Just as more Americans in the top half of the ecomony
cook less and order more food delivered, the US is producing less of some consumer goods to some extent, and importing more. And the strong dollar makes selling to the US more attractive than purchasing.
