Surefire Way to Reduce the Trade Deficit: Have a Recession

Trump is desperate to reduce the trade deficit. Perhaps his trade policies will do just that, via global recession.

A prolonged global trade war will add fuel to a nasty global recession.

But look at the bright side. It's a surefire way to reduce imports more than exports.

The bigger the recession, the bigger Trump's alleged "win".

Mike "Mish" Shedlock

Comments
No. 1-7
Realist
Realist

Rather than reducing the trade deficit with a recession, simply lower the wages of Americans to $1 an hour. The US would then become so cost competitive that you will be able to run huge trade surpluses with all those nations with much higher wages. Then the citizens of those countries could complain about how the US is taking advantage of them. Just like the Americans who complain on this blog. And Trump could claim success!

Sechel
Sechel

that is a trusim, but i wonder if it always has to be that way.

caradoc-again
caradoc-again

How much imported is bought on borrowed money, often impoverishing the borrow, putting the lender at risk and leading to nationwide systemic problems?

Increase interest rates to stem the building problems = recession.

To solve the problem choose your poison. Tariffs into Government tax coffers or raise rates, or both.

everything1
everything1

Parabolic government spending is holding many economic sectors up. It's not a trump economy, it's a consumer economy, very service based as we see more and more people going into business for themselves. Low interest rates allow easy borrowing, which leverages spending, same for equities, when you can borrow at lower price than you can earn in equities well then equities will continue to go up as the easy or should I say free money train ride continues (mostly for the rich of course). Trade war may serve to isolate America, possibly even damage it's world reserve currency status.

Kinuachdrach
Kinuachdrach

Mish, you know better than almost anyone else that there will be a recession some day. We all know that the elapsed time since the last recession has been abnormally long. We all should know that excessive debt -- especially governmental debt which was not used to build productive assets to generate the income to repay the debt -- will eventually cause a day of reckoning.

And everyone with a brain knows that excessive trade deficits are ultimately unsustainable. If anyone other than President Trump has a credible plan for reducing the trade deficit, he surely has done a great job of keeping it secret.

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