Why Trump's obsession with trade deficits is wrong

The meltdown of global stock markets in response to US President Donald Trump’s tariff announcements continued unabated as trading got underway on Monday.

The reaction of the markets came amid mounting criticism against the tariff hikes, with increasing numbers of economists and analysts offering insights into why Trump’s obsession with trade deficits is wrong.

The purported logic of the tariffs is that they’re designed to reduce the trade deficits America has with its trading partners. But, as Professor of Economics at Boston University Tarek Alexander Hassan explains,Trump’s frenzied attacks on the trade deficit show he’s misreading a sign of American economic strength as a weakness. If he really wants to eliminate the trade deficit, he should turn his attention to reining in the federal budget deficit.

What about the formula the Trump administration used to calculate what tariffs to impose? Peter Draper and Vutha Hing at Adelaide University argue that it’s detached from the rigours of trade economics. The formula assumes every trade deficit is a result of other countries’ unfair trade practices. And that’s simply not the case.

The trade deficit isn’t an emergency – it’s a sign of America’s strength

Tarek Alexander Hassan, Boston University

The word ‘deficit’ may sound alarming, but America’s trade gap is a sign of its financial and economic dominance.

No, that’s not what a trade deficit means – and that’s not how you calculate other nations’ tariffs

Peter Draper, University of Adelaide; Vutha Hing, University of Adelaide

To calculate its ‘reciprocal tariffs’, the Trump administration has opted for a crude formula with no basis in trade theory. We are all going to pay the price.

Consumers are boycotting US goods around the world. Should Trump be worried?

Alan Bradshaw, Royal Holloway University of London; Dannie Kjeldgaard, University of Southern Denmark

From black stars on European goods to apps showing what’s Canadian, consumers can respond to tariffs with their wallets.

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