Trump seems to be fixated on using tariffs to achieve balanced trade with each country on a bilateral basis. In arguing that bilateral trade is imbalanced, Trump focuses on US trade deficits in goods. In doing so , he conveniently ignores what are often US trade surpluses in services. Surely, the overall bilateral trade balance between t…
Trump seems to be fixated on using tariffs to achieve balanced trade with each country on a bilateral basis. In arguing that bilateral trade is imbalanced, Trump focuses on US trade deficits in goods. In doing so , he conveniently ignores what are often US trade surpluses in services. Surely, the overall bilateral trade balance between the US and any other country needs to take into account trade in both goods and services. If this were done, it would show that US trade with many countries, such as Canada, is much more balanced than Trump makes it out to be.
In any event, it makes no sense to seek balanced trade between the US and every other country on a bilateral basis. There are some countries that produce large quantities of goods that the US wishes to import, but which do not have populations or economies that are large enough or rich enough to absorb an equal value of US goods and services. For example, as a result of huge oil deposits off its coast, Guyana is likely to soon be exporting large volumes of oil to the US. There is no way that tiny Guyana will be able to absorb imports of US goods and services equal to the value of Guyana’s oil exports to the US. Does this mean the US should be imposing huge tariffs on its imports of Guyanese oil to offset its trade deficit with Guyana? That seems absurd.
Reciprocity makes sense when it means countries committing to provide each other with equal access to their respective markets. That is the kind of reciprocity that is typically the core objective of free trade agreements. With some limited exceptions, that kind of reciprocity has already been achieved by the current free trade agreement among the US, Canada and Mexico, which was negotiated and signed by Trump in 2018. So, why does Trump now want to rip up that agreement by imposing punitive tariffs against Canada and Mexico?
Rather than imposing punitive tariffs on countries that, for the most part, already practice trade reciprocity vis-à-vis the US, Trump should be focusing his attention on countries with high tariff and non-tariff barriers to trade. He should be pressuring those countries to dismantle rules and policies that prevent market access on an equal footing. In the spirit of reciprocity (and subject to reasonable national security restrictions), Trump should be prepared to dismantle such rules and policies on the US side as well.
Trump seems to be fixated on using tariffs to achieve balanced trade with each country on a bilateral basis. In arguing that bilateral trade is imbalanced, Trump focuses on US trade deficits in goods. In doing so , he conveniently ignores what are often US trade surpluses in services. Surely, the overall bilateral trade balance between the US and any other country needs to take into account trade in both goods and services. If this were done, it would show that US trade with many countries, such as Canada, is much more balanced than Trump makes it out to be.
In any event, it makes no sense to seek balanced trade between the US and every other country on a bilateral basis. There are some countries that produce large quantities of goods that the US wishes to import, but which do not have populations or economies that are large enough or rich enough to absorb an equal value of US goods and services. For example, as a result of huge oil deposits off its coast, Guyana is likely to soon be exporting large volumes of oil to the US. There is no way that tiny Guyana will be able to absorb imports of US goods and services equal to the value of Guyana’s oil exports to the US. Does this mean the US should be imposing huge tariffs on its imports of Guyanese oil to offset its trade deficit with Guyana? That seems absurd.
Reciprocity makes sense when it means countries committing to provide each other with equal access to their respective markets. That is the kind of reciprocity that is typically the core objective of free trade agreements. With some limited exceptions, that kind of reciprocity has already been achieved by the current free trade agreement among the US, Canada and Mexico, which was negotiated and signed by Trump in 2018. So, why does Trump now want to rip up that agreement by imposing punitive tariffs against Canada and Mexico?
Rather than imposing punitive tariffs on countries that, for the most part, already practice trade reciprocity vis-à-vis the US, Trump should be focusing his attention on countries with high tariff and non-tariff barriers to trade. He should be pressuring those countries to dismantle rules and policies that prevent market access on an equal footing. In the spirit of reciprocity (and subject to reasonable national security restrictions), Trump should be prepared to dismantle such rules and policies on the US side as well.