On Twitter today, President Donald Trump took a break from his usual fighting with Europeans about trade to pick what I guess he thinks is a fight with China over trade policy. Specifically, Trump wants us to know that he is getting tough and demanding a plan to reduce the US-China bilateral trade deficit by $1 billion.
China has been asked to develop a plan for the year of a One Billion Dollar reduction in their massive Trade Deficit with the United States. Our relationship with China has been a very good one, and we look forward to seeing what ideas they come back with. We must act soon!— Donald J. Trump (@realDonaldTrump) March 7, 2018
The problem here is that in Trump’s first year in office, the US-China trade deficit was $375.2 billion — well over $1 billion per day. That was a hefty increase from the $347 billion deficit we ran into 2016.
If you ask most economists, they will tell you that running a bilateral trade deficit with China is not a big problem. Indeed, running a worldwide trade deficit is not really a big problem now that the unemployment rate is low. America’s trade deficit with the world reflects the fact that the US is an attractive destination for foreign investment — something we ought to be proud of — which means we can afford to buy lots of foreign-made products.
But be that as it may, the point is that a $1 billion reduction in the bilateral relationship with China would be a drop in the bucket. This figure regularly fluctuates up and down by $10 billion a year for no particular reason. Trump is asking the Chinese to find a way to cut it by less than 0.27 percent but acting like he’s a tough guy.