How Can Trump DECREASE the US Trade DEFICIT? – VisualPolitik EN


There’s no doubt: the trade war is one of
the hottest topics in international politics. Here at VISUALPOLITIK, we’ve already spoken
about the consequences that this trade war may have – or which it may already be having. However, we should explore a question many
of you have asked – especially through our PATREON page – that is essential for analyzing
this entire matter. Why does the United States have such a large
trade deficit? Why do they have such a gigantic deficit,
which surpassed 550 billion dollars in 2017? And most importantly, how serious is it and
how can it be fixed? Yes, some of you may be thinking… Well, that’s easy… there’s a trade deficit
because the United States imports more than it exports, among other things because of
the evil unfair competition that has deindustrialized the country. Ergo, if we punish imports, the trade deficit
will decrease, right? After all, this is the stance of the White
House, of President Trump. Well… just a moment… because things aren’t
anywhere near as simple. Listen up. (THE EASY EQUATION) Step One: Choose, magnify and report a problem;
Two: place a large number on the table that we can all visualize; Three: create and blame
an enemy – whether it’s real or not… it doesn’t matter-; Four: warn everyone
of the consequences of this problem and, finally, end with a simple and electoral remedy…
that is also false. Folks, these are the steps for creating a
populist political discourse… a discourse that at the moment of truth may be worth nothing…
but which may help you win elections. Well, that’s exactly what the White House
is doing. With the aim of winning votes, they have created
a political discourse that, so to speak, is fundamentally based on a 3-element equation: But don’t worry, this has nothing to do
with math… at least not entirely. First element: the trade deficit causes terrible
damage; second element: this damage is due to the
other countries’ unfair competition, especially China; and third, the threat: due to the other countries’
bad behavior, the US’s industry and power is falling apart. However folks… discourse is one thing and
reality is another very different one. See, to magnify the problem, Donald Trump’s
commercial advisors alert us again and again about the negative impact that this whole
trade deficit has on the North American economy. To do so, they use the accounting entity that
you’re seeing on the screen, which is one of the formulas used to calculate the GDP. Thus, GDP equals Consumption, plus investment,
plus public spending plus exports minus imports. [I mean, this is economics 101.] Well, the fact is that seeing it this way
makes it look like the trade deficit is causing a huge amount of damage to the US economy,
and, of course, if the difference between exports and imports decreases, then the GDP
would increase. Prosperity for everyone. Easy, right? Well… just a second, because this all implies
simplifying things to the point where any resemblance to reality is purely coincidental. Why do I say this? Because relations with the rest of the world
have a lot, and I mean a lot of influence, on the other sections that make up the GDP. At the end of the day when a foreigner invests
in the United States or when US companies buy raw materials, capital goods or intermediate
goods, the effect on the economy isn’t exactly negative. Quite the opposite. If for example all these goods become expensive
because of tariffs then companies lose competitiveness. Here on VISUALPOLITIK we’ve already talked,
for example, about how tariffs have caused Harley Davidson to move its processes to Europe. In a similar way, more expensive import products
would also affect the retail sector… so that in the end… the relationship of this
supposed trade deficit with the GDP isn’t as direct as it might seem at first sight. The second element of political discourse
that the White House uses is that of unfair competition, especially in the case of China… And of course, supposedly because of Beijing’s
bad actions, China’s goods and services deficit alone exceeds 300 billion dollars
per year. And that’s when Trump thinks… let’s see,
if we decrease China’s trade deficit… then problem solved…. Well, folks, things don’t work that way
either. First, this unfair competition is at the very
least questionable. China has been blamed for manipulating its
currency. Well… it’s not true. In fact, it’s the opposite. In recent years the Chinese yuan has risen
a lot against the dollar. And do you know what happened to the trade
deficit with China when Beijing didn’t devalue its currency to export more? Well… it shot up. How can that be? Well, in reality, the US’s trade deficit
with East Asia in terms of manufactured goods has been more or less constant since the mid-90s. What has changed is that what once came from
Taiwan or Japan, among others, now comes directly from China, as it’s become a great assembly
center… And that’s precisely what has fattened the
US trade deficit with China so much. And regarding that last point… the one about
deindustrialization and loss of competitiveness due to unfair competition… well… it isn’t
true either. US exports – which remains the second largest
exporter in the world – are at record levels… just like industrial production. Check this out. No, I’m sorry, but China isn’t devouring
the American economy. But… just a second, then… if Trump’s arguments
aren’t true about the entire United States trade deficit… Why is there such an imbalance? What are the real reasons for it? Listen up. (THE REAL REASONS) You may be surprised to know that what caused
the US trade deficit wasn’t any country’s unfair competition. This time, all the fault stayed at home. Yes, leaving the theories that speak of evil
Chinese schemes to destroy the West aside may be much less exciting… but… I’m sorry… that’s the way things are. See, the commercial hole is due to the low
savings rate in the United States; the dollar is a reserve currency, which makes
it highly demanded and overvalued along with the huge amount of capital that
comes to the United States every year from abroad… for example, from China. As we’re going to see, this is what explains
why the United States spent more than 40 years with a trade deficit without the economy suffering. More than 40 years! In a row! Consuming more than it produces. Because folks, Trump always talks about the
trade balance… but never talks about the financial balance. And there’s the trap. (AN ABSOLUTELY LOST GAME?) There’s an economic law that the US President
seems to be unfamiliar with: the balance of payments, which measures the
monetary transactions of a country with the exterior, is always in equilibrium in a system
of floating exchange rates like the one that exists nowadays. Allow me to explain: when there’s a trade
deficit, it’s basically compensated by capital or financial account surpluses, which more
or less reflect the balance between the capital that arrives in the country and that which
leaves. That’s the money that comes in and the money
that comes out. ( A persistent current account surplus is
always balanced out by a capital account deficit. It’s one of the eternal laws of economics,
like gravity in physics”. – Konrad Putzier, a reporter at The Real Deal) Look at what happens, precisely, with the
United States Balance of Payments: As you can see, the trade deficit is offset
by surpluses in the financial balances. Now, does this mean that a country can buy
whatever it wants abroad, without limits? Well… obviously not. It can only import if it manages to finance
or compensate for its imports with capital that comes from abroad. Otherwise, first, its currency would depreciate
a lot – a pure law of supply and demand, high demand for foreign currency and little
for local currency – and then, eventually, the foreign currency reserves of the Central
Bank would dry up… unleashing an entire exchange crisis. This is something that in Latin America, especially
in Argentina, is very well known. Well ok… so what happens in the US’s case? Well, America is the greatest refuge for capital
on the entire planet, therefore every year huge amounts of capital enter the country. Practically half of the world’s savings are
spent investing in this country, either as loans; direct foreign investment or by buying
shares, bonds, etc., etc. Have you noticed, for example, the impressive
run that the SP500 has had in the last 9 years? Well… it’s precisely that enormous capital
flow arriving every year to the United States that allows Americans to consume more than
they produce and which, despite incurring commercial deficits for more than 40 consecutive
years, has led the country to practically always find employment, and record levels
of exports and industrial production. Now we can understand things like this: (“Whether it’s Japan in the 1980s, Germany
in the 2000s or China in recent years, countries that invest heavily in the New York real estate
market also tend to have a massive trade surplus with the U.S.” – Konrad Putzier, a reporter
at The Real Deal) Basically: thanks to the capital that comes
from abroad, the United States can afford to consume more than it produces. So in addition to exporting goods and services,
the United States also exports financial securities. This is the key. But, wait, does this mean that the fiscal
deficit can’t be reduced? Not at all. (HOW TO DECREASE THE COMMERCIAL DEFICIT) As you can see, sometimes things aren’t
as they seem at first. Having a trade deficit doesn’t have to be
bad. After all, the ultimate economic objective
must be to improve living conditions, that is, the ability to consume more and better
goods and services. But… yes, a bulky and continuing trade deficit
can have some drawbacks For one, it assumes more risk… a risk that
capital will stop flowing towards the country, which could lead to a huge crisis. And for another, it favors debt growth. A country flooded with money from abroad? That means abundant and cheap money, and who
doesn’t want cheap money? So let’s continue with the key question:
how can Donald Trump decrease the US trade deficit? Well, there are, mainly, 3 options… 2 that we should set aside and 1 that’s
highly recommended. The first two – those we don’t recommend
– would be either agreeing to devalue the dollar and stop it from being the hegemonic
currency of the world with the Federal Reserve, so imports would be much more expensive and
nobody would want to take their money to this country; Or the US could restrict the capital coming
from abroad, for example through taxes… of course that… in the long run, would be
a disaster. The other option, the one we recommend, is
consuming less, saving more and favoring productive investment. That way, fewer foreign loans would be demanded
and much more wealth would be generated, so that, in percentage terms over the GDP, trade
deficits would be much smaller. And to achieve this goal, stopping the government’s
growing fiscal hole would be a fantastic idea. But Trump, despite his speech, is going in
the opposite direction. It would also be a fantastic option to allow
American companies to fill the nearly 6 million vacant jobs that the North American economy
suffers today by bringing professionals from abroad. However… protectionist policies don’t
work… first because all the other countries tend to respond to tariffs with their own
tariffs, which reduces imports but also exports; and most importantly because the increased
costs led by tariffs make the United States a less attractive country to invest in…. And that, in the long term, is a very bad
thing. Perhaps, folks, the strongest proof that American
companies need to be open to the world is found in the Trump family itself. Yes, in the Trump family. See, Ivanka Trump, the President’s own daughter
and White House special adviser has just closed her clothing and accessories brand. Ivanka made this decision after suffering
a steep drop in sales and a huge amount of criticism for some alleged contradictions Do you know why she was so criticized? Well… can you guess where she was making
her products? Surely in the United States, right? Well… no, wrong… the correct answer is
in China! Most of her products were made in China! And also in countries like Vietnam and Indonesia. Has Ivanka Trump herself been an accomplice
of the evil entities that have been attacking the United States? I’ll leave that there. So I really hope you enjoyed this video, please
hit like if you did, and don’t forget to subscribe for brand new videos. And don’t forget to check out our friends
at the Reconsider Media Podcast – they provided the vocals in this episode that were not mine. Also, this channel is possible because of
Patreon, and our patrons on that platform. Please consider joining them and supporting
our mission of providing independent political coverage. And as always, thanks for watching!

53 Comments

  • They should change the Constitution so you could become president.

  • You forgot to mention that the US buys $800B of disposable consumer goods, and china buys $800B of US cement factories, farms, ports, mines and tech firms. China: very smart, rest of world: foolish and naive. (And I won't even get into the currency pegging, restrictive currency trading, and banned foreign ownership, etc ) Consumption and savings are just a small part of solution.

  • Yes,reduce subsidies of foreign governments!!!
    The US market is 50% of global consumption,we are playing to win!!!

    Breton Woods set us up,for this…

    Did you know Simon???

  • Screw the GDP time to measure it with UBI Andrew Yang for president 2020 time too spend the money inside of America.

  • The Middle East can get there money from everybody else besides America because the us greenback will soon be useless with dumbass Trump Americans allow these idiots too run the country to the ground if we don't get Andrew Yang in 2020 say goodbye to the fucked up world.

  • americans commenting here, just like the putin videos. showing their ignorance. VAT IS NOT TARIFF WE PAY SAME FOR US CAR AS CHINA CAR. lol go stop innovating and complain more please. ignorance is bliss yanks

  • giving up the usdollar and making usa like china was sinc e 1970s becoming the worlds crafting chamber

  • The U.S. has a culture of spending spending than saving saving

  • The national debt is 22 trillion and growing. Total personal debt is 19 trillion.

  • china is an assembly center/ you mean they use slave labor in reeducation camps for prisoners of conscience specifically to undermine the american ecoomy.

  • wrong we have a trade imbalance with china because china doesnt let american companies compete fairly in china. china steals there intellectual property and gives it to a chinese business which is subsidized so it can out compete the american company. an estimate 6oo billion dollars of economic growth is stolen by china every year. trump is absolutely correct in saying the trade imbalance is due to unfair trade practices.

  • You to do realize that American consumers make it powerful enough to sanction anyone right? I get it your European… but dont pretend the USA is not clever just because they tariff the EU.

  • Still voting for trump. Trump pince 2020

  • Be serious the ass holes that voted for Trump and will vote for him again cannot do basic math They are stupid.

  • It survived 40 years because of America’s Savings that are consumed, also China has increased its real wages and are more and more focusing on their own market, as the purchasing power raised. Also China was pressured to do so by everyone in G20 meetings.

    After China its now Germany as they are “devaluing” their currency through wage dumping. On the cost of the Eurozone as their “currencies” (competitiveness) increased and can’t decrease their wages as it cause Deflation in the Eurozone.

    So Germany can sell cheap with high quality wich is giving everyone in the Eurozone trade debts.

  • Everyone knows that Trump has a hard time holding onto Ivanka's hips with his tiny Russian hands.

  • What caused the drop in Real Manufacturing Value Added from 3rd quarter 2007 to 2009 and what turned it around? That would be a fascinating video.

  • So something that you didn't talk about but feels important to me is wondering why we have a trade deficit. It seems that we are wealthier. We buy more from other countries (as well as our own) because we as consumers have more wealth. It seems to make sense. What do you think? If so, it wouldn't be a bad thing, but just the opposite. A corollary is something that you did touch upon that we have very low levels of savings which equals high levels of consumption. It would complement this video which left it a bit vague what is going on from the point of a consumer.

  • 4:00 Ah so import more and they will invest more – of course, Guardian readers because you're then a great investment, any business there will also be part of the importing more and decline just as much – brilliant. Also, China can manipulate currency and has but hasn't in years since we're watching.

  • First, it's the U.S. problem, not Americas. And that is the problem of 'instant gratification'. China is known for it's patience. At least the older generations are.

  • Hit the nail on the head in this video, consumption and fiscal irresponsibility at the micro level is the main problem of the US regarding its deficit. This stems from a lack of education of its youth or its unwillingness to be educated about conservative spending. Broadly speaking this is due to the epidemic of parenting failures that afflicts the entire nation.

  • The trade deficit is a function of the Federal Fiscal deficit : the imposition of import duties won’t affect the trade deficit – they are two interconnected different issues

  • Traitor Trump has a hard time holding onto Ivanka's hips with his tiny Russian hands.

  • by stopping the fucking debt….

  • Lies…Trump is stopping Million of uneducated,unskilled workers who drain public services but instead he wants a merit based LEGAL immigration system attracting foreign professionals…This is a fake anti Trump channel

  • outside US people collect dollar money and keep it like a jewelry
    . just keep that condition and US will be alright

  • China is world's THIEF , this political correctness got TRUMP elected

  • @7:33, Jesus Christ, man!

  • i think you are a good presenter sometimes….. often you just present data with spin without even engaging with the multitude of factors that influenced data. Rhetorical question; do you have bias? if so what direction does it propagate?? Just kidding, I know you have a pro-establishment bias. I dont want to tear down the world and its systems but I think its pretty clear that you want to prop up control systems. I dont think you do anything on purpose but you clearly cherry pick and present that which confirms your bias. Learn critical thinking people!

  • Hahaha… The dumb ignorant americunt trumptards are facing the reality. USA is fuck up, a country with LESS SAVING culture and value high consumerism will be doomed unlike China they have high savings rate yet due to very big population, a business can earn a high profit compared to US where americans purchasing power are weaker and weaker year by year. Lol. As the decades will come their country will become Brazil of North America, an irrelevant and fucked up country heavily in debt, lots of crime (well its happening already anyway) and outstanding corruption as seen in their politics.

  • Finding a way to improve the savings rate in the US would likely go a very long way to tamping down on the growing dissent in the country too. Yet we, as a society, are addicted to debt.

  • Is England sloughtering USA ?

  • Think what the world could have done, if China didn't give subsidies, government shipping, theft of IPs and fairly opened its market instead of picking and choosing, all against the WTO, but it has helped America change to a more service and tech oriented economy.

    Tariffs just force the supply chain to be fixed, India will benefit the greatest, Foxconn is already moving.

  • This is Typical liberal propaganda, full of facts. Still trump 2020, keep your reality

  • How about the impact stolen technology has on trade deficits? Why not be honest about China's state sponsored technology theft? And as long as we're talking about GDP, let's be clear what China's theft costs the average American taxpayer.

  • Simon you don't like Trump. You're just another lefty who over reacts to ANYTHING Trump does. Will you be man enough to do another video 2 years from now admitting your errors when Trumps policys work better than you assumed?

  • Need to manufacture here in the usa….no matter what it is…..they want slave labor….since the mid 70s…..why did the steel mills go in the 70s….

  • Is simon English or Australian

  • Well, it looks like Trump is fighting to stop China but not to make American manufacturing more competitive or trade deficit smaller. I used to think that it was obvious. It seems that Trump tries to stop the expansion of Chinese bubble economy to not let it to overtake the US, financially or technologically. China has a lot of problems and just try to imagine if it has become the largest economy, what's going to happen then. It's like a trade war with Japan with the only difference: under Reagan, Japanese corporations used to move their manufacturing from Japan to America, while here American corporations just remove manufacturing and assembling centers out of China for Vietnam, Mexico, India, US, ( Mexico has already become the largest trading partner for the u.s. replacing China and Canada), potentially creating economic miracles. So it doesn't seems like a War for America but war against China.

  • Simon… you are looking at trade with China through a single lens. For example… The Chinese government subsidizes large companies by providing offsets in the shipping costs to the US. This encourages the purchase of Chinese goods because the shipping costs are next to zero. This is one example in many examples of unfair trade practices. I fear that whomever is writing your scripts has a political motive because your dialogue isn't showing the complete picture.

  • Detach dollar from oil . Price of dollar goes down. Export. Profit?

  • The real cause of the trade deficit is that China REFUSES to allow the yuan to seek its true market value which would be somewhere between 2 to 4 times its current value. Contrast this with the Japanese yen, whose value has steadily increased over the years in response to trade surpluses, in accordance with the laws of the free market. In order to look like they were doing something China, in the Bush 2 administration changed he peg of the yuan from the US dollar to a “market basket” of major currencies, so the ups and downs that it experienced are a result of the US dollar going up and down with respect to other currencies, affecting the value of the market basket. Also the recent fall of the yuan represents further manipulation in retaliation for the tariffs.
    There is supposed to be a free market of currencies that SHOULD cause the currencies of the trade surplus countries to rise and the currencies of the trade deficit countries to fall. There isn’t one because not only do countries hoping to develop an economy off of cheap labor manipulate their currencies but so do large banks based mostly in Europe (to allow insiders to profit from currency trades and to allow their friends to have cheap labor markets), outside the control of Trump or any other US president.
    I don’t know why the US hasn’t designated China a currency manipulator because it is so obvious. I can only guess that the Chinese have bribed someone in the US government.
    In the face of all this sabotage and inability to act because of lack of sovereignty over big banks in other countries, Trump has NO CHOICE but either 1) tariffs, as imperfect as they are. Yes, tariffs hurt everyone due to retaliation, but they inevitably hurt the surplus country more. Or he can 2) take measures to devalue the dollar, something you seem to admit would work but would obviously cause its own pains. I really don’t see any other choice but #2. However, I believe the tariffs are in fact meant as a negotiating ploy to get better trade agreements and are an attempt to solve well-documented Chinese unfair trade practices, and will need to be done first before #2. They also represent an attempt to politically justify #2 on the basis of #1 being tried and failing to solve the problem.
    Your observation that trade deficits are compensated for by monetary inflows ignores one basic thing –it basically is a short term fix that results in MORE long term debt to foreigners and thus cannot be sustained. The trade deficit MUST be fixed come hell or high water.
    Trump by himself cannot make up for 50 years of short-sightedness by previous presidents (starting with Nixon) but at least he is making a start.
    I WOULD suggest, if you haven’t done so, that you make a video about the Petrodollar. I believe that is another contributing cause of the high US dollar. Take that away and the dollars’ value will fall and help fix the trade deficit, at least with other developed countries.
    A third factor is the status of the US dollar as the world’s reserve currency.
    You are right about American consumers overspending but if the trade problem is solved then at least the money will stay in the country and enrich wealthy Americans instead of wealthy foreigners and the government will have a sovereign ability to do something about it through taxes on some of the accumulated wealth.

  • Trump is fucking the US for decades to come

  • People will always prefer to believe a simple falsehood to a complex truth. And every populist politician knows this.

  • Who tarif first 😂

  • I think that you're missing the point. A lot of Trump voters suffer from investment coming from abroad. 1- They are making real Estate market unfordable in large cities like New York. This is so many Americans are leaving states like NY or California, real estate became unaffordable. 2- The Stock exchange is the other main receiver from foreign investors, and once again they do not benefit from it since most of them do not own stocks. 3- If you look at the companies with the largest valuation (Google and Facebook), they are not known for hiring people from West Virginia. But famous for shipping jobs abroad. I agree Amazon is a counterpoint at the moment but their main objective is to get rid of human employees as fast as possible. I don't think anyone is saying that cities like Seatle and San Francisco are doing poorly, what trump voters are saying is to try to think a little bit about lower-income families that do not have a degree in states like West Virginia or Idaho. 4 – Trade imbalance =/= Foreign investment, if it did the U.K, would not be the largest foreign investor in America. (Sorry for my English I am a French who recently moved to America)

  • The point is USA is fucked.

  • Who cares about all this? As long as China never becomes the worlds leading superpower I am happy.

  • Another fake leftist bastard

  • China was getting a free ride by us. This presentation excuses China for its action

  • Adding more tariffs is going to make it a million times worse,,,,
    and if you thought poverty and unemployment are high now,,,, then wait till you see what kind of horror show is coming…..BETTER PUT YOUR SEAT BELTS ON,,,, its going to be a killer ride people ;-((

    The USA began applying trade tariffs right before the DEPRESSION OF 1929, the stock market crashed, because when the tariffs were applied then investor confidence went south….
    History is about to repeat itself, , , , the only problem is that nobody will recover from such a worldwide category 10 economic hurricane……..

    The US is going to be exporting a hell of a lot less now that he is slapping all these unnecessary tariffs that will kill the economy in the worst way……
    What so, is there not enough jobs being lost,,, not enough business closing down – and these tariffs are going to implode the economy world wide… and it is going to bring on marshall law and a lot of chaos worldwide ;-((

    .

  • PRODUCE IMPORTS LOCALLY to reduce Trade Deficits Globally
    https://www.youtube.com/watch?v=3CZ1iuJCG3I
    #Ideas, #Innovations, #Economy, #TradeDeficit, #GlobalTrade, #CurrentAccount

  • Buying things you don't need with money you don't have to impress people you don't like.
    Muricah!

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