Document Type

Conference Proceeding

Publication Date

2018

Journal Title or Book Title

Northeast Business and Economics Association (NBEA) 2018

Version

Publisher's PDF

Publisher's Statement

PUBLISHED BY THE NORTHEAST BUSINESS & ECONOMICS ASSOCIATION © 2018 The Northeast Business & Economics Association reserves the right to publish the Proceedings in both print and electronic formats. The individual authors retain the copyright over their own articles.

Abstract

The US trade deficit with China was $336 billion in 2017, representing more than half the overall US trade deficit (Census, 2018). So, it is no wonder that policymakers, the press, and the public are focused on this trade relationship. The Administration has stepped up its criticism of China and imposed tariffs in response to unfair trading practices regarding intellectual property (Price, 2018), and China’s reluctance to open markets to US producers. The Administration has also engaged in trade spats with Mexico, Canada, Japan, Germany, and others. While the goals of protecting US intellectual property rights and expanding export markets are laudable, the President’s emphasis on eliminating bilateral trade deficits with China and other nations as a means to solve the overall deficit is doomed to fail (Tyson, 2018). This paper makes the following observations: (1) Balancing trade with China and other nations would not correct the overall US trade deficit, as the massive deficit is entirely due to insufficient domestic saving (2) The Administration’s recent decisions to cut taxes and increase government spending will likely worsen the trade deficit. (3) The widening deficit with China reflects shifts among Asian producers and has not expanded the overall US trade deficit.

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