is Trump backing down with his tail between his legs..

i noticed you disagreed with trade surpluses being good. there is a good example from history to illustrate.

sometime in the 1800s or thereabouts, GB was running a trade deficit with China. so England was sending more money to China than they were sending back to England.

so how did GB make up the shortfall? with crown silver..

well England needed an export. what did they settle on? opium. turned China into a bunch of drug addicts. and that is how England solved their trade deficits with China..

great powers who want to remain great do not run trade deficits and budget deficits year after year. that is why i support Trump's goal, if not his methods..

one more point. you took issue with Biden's mfg incentives. in the IRA, Biden introduced several incentives for re-shoring silicon wafer manufacturing. his initiatives have been highly sucessful, especially in red districts. he gave Trump a perfect model of how it's done. and starting trade wars isn't it.

i will be hear your rebuttal-if i represented your positions correctly-because i find your posts generally inciteful and typically well-supported Originally Posted by pxmcc

Note to the moderator: This is on topic. If Trump understood what Pxmcc will after reading this, he wouldn't have gotten himself into a position where he'd have to back down with his tail between his legs.

Pxmcc, The two people who could really explain this to you well are Texas Contrarian and Lusty Lad. I've had a grand total of one class in macroeconomics, although it was memorable. The professor used to take dictation from LBJ when President Johnson was taking a dump in the White House loo. And I have a little real world experience in the area.

TC and LL on the other hand obviously have very strong economics backgrounds (like PhD level) and/or have worked full time in the area. Either would be the best Secretary of the Treasury this nation has had since Robert Rubin. In fact there are rumors than Lusty Lad is Steve Mnuchin in real life.

TC and I have been discussing the trade deficit over in the "Is Trump an Idiot" thread,

https://eccie.net/showthread.php?t=3028877

A good place to start is with TC's post #191. Then you might take a look at my post #197, particularly the Wikipedia link. I overstated the case for the relationship between the trade deficit and the budget deficit, savings and investment, as it's actually a theory with some simplifications and not an identity, but I believe it still does a pretty good job of explaining reality. I'll repeat the equation:

(S-I) + (T-G) - NX, or

(Private Savings - Investment) + (Taxes - Government Spending) = (Exports - Imports), or

Private Savings + Government Budget Balance - Investment = Trade Balance

You would like us to run a trade surplus. That is, you'd like for the trade balance to be greater than zero, or exports to be greater than imports.

For this to happen, (Private Savings + Government Budget Balance) must be greater than Investment.

The majority of our countrymen live hand to mouth. That is, they don't save a lot. And our federal government is hopeless. The CBO forecasts budget deficits of 6%+ of GDP as far as the eye can see.

Let's plug in some numbers. I asked ChatGPT for the numbers for the equation for 2023 and she gave me this:

Private Savings = 5.58 trillion
Private Investment = 5.10 trillion
Budget Deficit = 1.7 trillion
Trade deficit = 1.02 trillion in goods and 785 billion in goods and services. OK, please pretend like the trade deficit was really 1.22 trillion, even though it wasn't, because that will make this a whole lot easier to explain. Like I said earlier, the equation is a theory, with some simplifications, not an identity.

So 5.58 trillion - 1.7 trillion - 5.1 trillion = -1.22 trillion

If you want the trade deficit to get to "0", you're going to have to do one of the following, or some combination in smaller amounts:

Increase private savings by 1.22 trillion. Fat chance of that.

Decrease the government budget deficit by 1.22 trillion. Fat chance of that too, despite what Elon Musk told you.

Decrease investment by 1.22 trillion. We don't want to do that either. Investment is what grows the economy and makes us more prosperous.

So, the alternative is run a trade deficit.

Now, eternally running big budget and trade deficits can be hazardous to your country's health. Many a country has suffered an economic crisis as a result, especially when the deficits resulted in a lot of external debt in foreign currencies (that is, debt owed to foreigners in currencies other than your own.)

That however does not apply to the United States of America!

First, we don't borrow in Euros or Yen or renminbi. We borrow in the local currency, our dollar.

Second, the dollar is the world's primary reserve currency.

It's the currency most trade is denominated in. Lots of good opportunities await foreigners who have dollars. They can buy U.S. treasury instruments, tech stocks, real estate, etc. (Aside: This abundance of opportunity explains why Australia too has gone through long stretches with both budget and trade deficits and still prospered: there are lots of opportunities for foreigners to invest Australian dollars in Australia.)

Finally, at least until Trump's Liberation Day, the dollar was viewed as safe and a good store of value. The USA has been around for centuries. We have the rule of law, and many people trust our government better than they trust their own. Before April 2, 2025, when the shit hit the fan, where did the foreigners go? To the dollar, that's where! Over half our paper currency in circulation, I believe over $1 trillion, is stashed under foreigners mattresses. Which is an excellent illustration of what I've been saying, the Asians work their asses off and send us real stuff, like clothes, toys and consumer electronics. And in return we send them paper, which they stuff under their mattresses! It's a great deal.

I won't mention the name of the country as I might out myself, but I've invested on one tiny country that did what Trump's trying to do. They embarked on an import substitution policy, trying to replace imports with domestic production. They raised import tariffs sky high. It did not work out well. The trade deficit did not decline. Their budget deficit remained high. Domestic companies became fat and lazy. Consumers paid high prices. It's a very poor place. Two people in that country said something to the effect of, "We were just as well off as Singapore in the 1960's. Look at us know." Singapore by contrast cut tariffs to "0". That's one of the reasons it's by some measures the most prosperous country in the world, per capita, outside of a few petrostates and tax havens like Abu Dhabi and Monaco.

Finally, I actually agree with you more than I let on. I don't like running huge trade deficits. But I'd much rather correct the problem by increasing personal savings and decreasing the budget deficit, and by providing conditions that will enable American exporters to better compete in world markets. I believe what Trump's doing is destined for failure.

I've written enough for tonight. As to Biden and green spending, please see the seminal "How are we going to pay for all this shit" thread.

https://www.eccie.net/showthread.php?t=2773114

You'll want to skip down to after when the Inflation Reduction Act was passed.

I don't think he's looking for fair trade agreements Salty. If he were, he wouldn't be imposing a 10% minimum tariff on, for example, Singapore, which doesn't charge ANY tariffs on our imports. Or Australia, which charges small tariffs and with which we have a trade surplus. You should agree with that. We shouldn't charge a stinkin' tariff of Australia, it's our greatest friend and ally. Originally Posted by Tiny

... You do NOT need to worry on the tariff deal
with Australia, mate...

And as Trump has stated - some of the tariffs
could end up being zero - depending on the nation
and the agreement.

... Let's give President Trump a few more weeks.

#### Salty

Losing.

thank you for your post. as i mentioned earlier, you appear to always do your homework.

let me try a thought experiment. suppose i'm bad at math, and i experience anxiety whenever i see a big equation like the one you posted. and further, let me concede that in real life, there's no way that the #s in that equation will ever add up to a trade surplus..

but let's also assume that i, like Trump, am as stubborn as a mule. (actually, more often, i am accused of being a human pitbull). and i still want my damn trade surplus..

so i say, let's assume further that i'm a robber baron, and i have many robber baron friends. and i get my whole team of robber barons together and say, "gents, time to take one for the team. i'm effing sick n tired of all these damn trade deficits. i need you, my fellow robber barons, to open up your fat wallets, and i'll be damned if we're not gonna build factories to put China to shame. i want factories that will stock Wal-Mart and Target from floor to ceiling, and we're gonna beat China if it's the last thing we do; which, well, it just might be.."

and you get your robber barons on board, and capitalize the greatest reshoring of mfg this earth has ever seen..

and you go to Trump, and you say, "Listen, the Donald, the greatest president in the history of the Republic, i know about the 'poison the blood of the WASPS, and how illegal immigrants are below cockroaches in your esteemed eyes, but i just raised enough capital to make American manufacturing great again, but i need workers. cheap workers. hungry workers. workers who will do anything for a shot, even work at below minimum wage for 18 hours a day. and that aint the admittedly superior race of white Anglo Saxon Protestants. that, sir, is illegals from the poorest folks in the world, who have no papers. i'm talking wetbacks, sir, if y
you catch my drift. i need a guest worker plan to end all guest worker plans. and together, sir, we'll make America Great Again, and sink those atheist Commie bastards who are eating our lunch.."

and it happens exactly like that..

so my question is, isn't that a viable path to ending trade deficits, instead of getting ourselves all tied up in knots ov
er a practically unsolveable equation?

so my point is, trade deficits could actually be solved if we took the appropriate actions and got the right stakeholders on board, right? am i overlooking anything?

and this is actually what Trump is trying to do, but unfortunately, he hasn't a clue how to get it done, unfortunately..

as to the pay-fors in the IRA, when we get real companies producing real products for use at home and abroad, shit be gettin paid for, and real Americans be gettin real paychecks, which is actually how we Make America Great Again..

thoughts?

Note to the moderator: This is on topic. If Trump understood what Pxmcc will after reading this, he wouldn't have gotten himself into a position where he'd have to back down with his tail between his legs.

Pxmcc, The two people who could really explain this to you well are Texas Contrarian and Lusty Lad. I've had a grand total of one class in macroeconomics, although it was memorable. The professor used to take dictation from LBJ when President Johnson was taking a dump in the White House loo. And I have a little real world experience in the area.

TC and LL on the other hand obviously have very strong economics backgrounds (like PhD level) and/or have worked full time in the area. Either would be the best Secretary of the Treasury this nation has had since Robert Rubin. In fact there are rumors than Lusty Lad is Steve Mnuchin in real life.

TC and I have been discussing the trade deficit over in the "Is Trump an Idiot" thread,

https://eccie.net/showthread.php?t=3028877

A good place to start is with TC's post #191. Then you might take a look at my post #197, particularly the Wikipedia link. I overstated the case for the relationship between the trade deficit and the budget deficit, savings and investment, as it's actually a theory with some simplifications and not an identity, but I believe it still does a pretty good job of explaining reality. I'll repeat the equation:

(S-I) + (T-G) - NX, or

(Private Savings - Investment) + (Taxes - Government Spending) = (Exports - Imports), or

Private Savings + Government Budget Balance - Investment = Trade Balance

You would like us to run a trade surplus. That is, you'd like for the trade balance to be greater than zero, or exports to be greater than imports.

For this to happen, (Private Savings + Government Budget Balance) must be greater than Investment.

The majority of our countrymen live hand to mouth. That is, they don't save a lot. And our federal government is hopeless. The CBO forecasts budget deficits of 6%+ of GDP as far as the eye can see.

Let's plug in some numbers. I asked ChatGPT for the numbers for the equation for 2023 and she gave me this:

Private Savings = 5.58 trillion
Private Investment = 5.10 trillion
Budget Deficit = 1.7 trillion
Trade deficit = 1.02 trillion in goods and 785 billion in goods and services. OK, please pretend like the trade deficit was really 1.22 trillion, even though it wasn't, because that will make this a whole lot easier to explain. Like I said earlier, the equation is a theory, with some simplifications, not an identity.

So 5.58 trillion - 1.7 trillion - 5.1 trillion = -1.22 trillion

If you want the trade deficit to get to "0", you're going to have to do one of the following, or some combination in smaller amounts:

Increase private savings by 1.22 trillion. Fat chance of that.

Decrease the government budget deficit by 1.22 trillion. Fat chance of that too, despite what Elon Musk told you.

Decrease investment by 1.22 trillion. We don't want to do that either. Investment is what grows the economy and makes us more prosperous.

So, the alternative is run a trade deficit.

Now, eternally running big budget and trade deficits can be hazardous to your country's health. Many a country has suffered an economic crisis as a result, especially when the deficits resulted in a lot of external debt in foreign currencies (that is, debt owed to foreigners in currencies other than your own.)

That however does not apply to the United States of America!

First, we don't borrow in Euros or Yen or renminbi. We borrow in the local currency, our dollar.

Second, the dollar is the world's primary reserve currency.

It's the currency most trade is denominated in. Lots of good opportunities await foreigners who have dollars. They can buy U.S. treasury instruments, tech stocks, real estate, etc. (Aside: This abundance of opportunity explains why Australia too has gone through long stretches with both budget and trade deficits and still prospered: there are lots of opportunities for foreigners to invest Australian dollars in Australia.)

Finally, at least until Trump's Liberation Day, the dollar was viewed as safe and a good store of value. The USA has been around for centuries. We have the rule of law, and many people trust our government better than they trust their own. Before April 2, 2025, when the shit hit the fan, where did the foreigners go? To the dollar, that's where! Over half our paper currency in circulation, I believe over $1 trillion, is stashed under foreigners mattresses. Which is an excellent illustration of what I've been saying, the Asians work their asses off and send us real stuff, like clothes, toys and consumer electronics. And in return we send them paper, which they stuff under their mattresses! It's a great deal.

I won't mention the name of the country as I might out myself, but I've invested on one tiny country that did what Trump's trying to do. They embarked on an import substitution policy, trying to replace imports with domestic production. They raised import tariffs sky high. It did not work out well. The trade deficit did not decline. Their budget deficit remained high. Domestic companies became fat and lazy. Consumers paid high prices. It's a very poor place. Two people in that country said something to the effect of, "We were just as well off as Singapore in the 1960's. Look at us know." Singapore by contrast cut tariffs to "0". That's one of the reasons it's by some measures the most prosperous country in the world, per capita, outside of a few petrostates and tax havens like Abu Dhabi and Monaco.

Finally, I actually agree with you more than I let on. I don't like running huge trade deficits. But I'd much rather correct the problem by increasing personal savings and decreasing the budget deficit, and by providing conditions that will enable American exporters to better compete in world markets. I believe what Trump's doing is destined for failure.

I've written enough for tonight. As to Biden and green spending, please see the seminal "How are we going to pay for all this shit" thread.

https://www.eccie.net/showthread.php?t=2773114

You'll want to skip down to after when the Inflation Reduction Act was passed. Originally Posted by Tiny

thank you for your post. as i mentioned earlier, you appear to always do your homework.

let me try a thought experiment. suppose i'm bad at math, and i experience anxiety whenever i see a big equation like the one you posted. and further, let me concede that in real life, there's no way that the #s in that equation will ever add up to a trade surplus..

but let's also assume that i, like Trump, am as stubborn as a mule. (actually, more often, i am accused of being a human pitbull). and i still want my damn trade surplus..

so i say, let's assume further that i'm a robber baron, and i have many robber baron friends. and i get my whole team of robber barons together and say, "gents, time to take one for the team. i'm effing sick n tired of all these damn trade deficits. i need you, my fellow robber barons, to open up your fat wallets, and i'll be damned if we're not gonna build factories to put China to shame. i want factories that will stock Wal-Mart and Target from floor to ceiling, and we're gonna beat China if it's the last thing we do; which, well, it just might be.."

and you get your robber barons on board, and capitalize the greatest reshoring of mfg this earth has ever seen.. Originally Posted by pxmcc

I believe that would increase the current account or trade deficit Pxmcc. And I know it would be a mistake. The robber barons are simply reallocating savings when they move their money from portfolio investments to build factories. New savings aren't being created. That's unless they're coming up with the money for the new factories by consuming less. Then yes, that would reduce the trade deficit. Otherwise the extra investment to build the new factories comes from a higher current account deficit

There is no free lunch. If we want to reduce the trade deficit, then Americans in general, not just the robber barons, need to produce more and/or consume less.

I question the wisdom of what you're proposing, stocking the shelves of Walmart and Target from floor to ceiling with American made goods. So Trump's going to go to Elon and say, "Hey Elon, all our b**y strollers come from China. And I've placed a 150% tariff on the poor bastards! You should build a factory to make b**y strollers, you'll clean up!" Well, that's too good to pass up. Elon could be investing in boreholes or satellites or whatever, but instead he's going to make b**y strollers, because that's where the money is! Respectfully, that's a bad idea on steroids. It's worse than Biden's Inflation Reduction Act. The best way to grow GDP and improve the productivity and prosperity of Americans, and reduce the current account deficit as a byproduct, is to let the free market work. Not to tell people to build b**y strollers.

and you go to Trump, and you say, "Listen, the Donald, the greatest president in the history of the Republic, i know about the 'poison the blood of the WASPS, and how illegal immigrants are below cockroaches in your esteemed eyes, but i just raised enough capital to make American manufacturing great again, but i need workers. cheap workers. hungry workers. workers who will do anything for a shot, even work at below minimum wage for 18 hours a day. and that aint the admittedly superior race of white Anglo Saxon Protestants. that, sir, is illegals from the poorest folks in the world, who have no papers. i'm talking wetbacks, sir, if y
you catch my drift. i need a guest worker plan to end all guest worker plans. and together, sir, we'll make America Great Again, and sink those atheist Commie bastards who are eating our lunch.." Originally Posted by pxmcc

That makes a lot more sense than your first idea. Those guest workers are going to produce more than they consume. They'll save a higher % of what they make than your average American. They'll all be working instead of living off the government tit. They'll pay in for social security and Medicare and not draw much out. So the guest workers will increase savings and reduce the government budget deficit. And that will reduce the trade deficit.

so my point is, trade deficits could actually be solved if we took the appropriate actions and got the right stakeholders on board, right? am i overlooking anything? Originally Posted by pxmcc

Yes, if you can get people to consume less and produce more (which is the same thing as increasing private savings) and reduce the government budget deficit, you'll reduce the trade deficit.

as to the pay-fors in the IRA, when we get real companies producing real products for use at home and abroad, shit be gettin paid for, and real Americans be gettin real paychecks, which is actually how we Make America Great Again..

thoughts? Originally Posted by pxmcc

If Biden had been subsidizing, say, rare earth elements and magnets and other products essential to national security, I'd applaud him. However, he was mostly handing out pork. It's usually better to let free markets work. The IRA will run up the deficit by $1 trillion+ according to Goldman Sachs, assuming we don't raise taxes to offset the IRA. If you want to encourage green energy, wouldn't a REASONABLE carbon tax levied in a way that wouldn't affect our exports make a lot more sense? But I'll have to get back to you on that, running short on time, and we should probably discuss in another thread since site management is pretty strict about staying on topic.

^^well we are somewhat in agreement at least..

i'm not an economist-my background is in biochemistry, mol bio and law-but do we have any economists here who could address my claim that if we built a bunch of factories with private money, staffed them with low wage workers, and made everyday products for consumption at home and for export abroad, that we could lower our trade deficits? i thought that was the U.S.A.'s economic model in the 50s that made us the richest country in the world, and what Trump is trying to recreate. do we have any econ nerds who can weigh in?

^^well we are somewhat in agreement at least..

i'm not an economist-my background is in biochemistry, mol bio and law-but do we have any economists here who could address my claim that if we built a bunch of factories with private money, staffed them with low wage workers, and made everyday products for consumption at home and for export abroad, that we could lower our trade deficits? i thought that was the U.S.A.'s economic model in the 50s that made us the richest country in the world, and what Trump is trying to recreate. do we have any econ nerds who can weigh in? Originally Posted by pxmcc

Why do you want to build everyday products in the USA? Wouldn’t it be better to use American labor and capital to build airplanes, high end semiconductors, cutting edge medical devices and the like? Produce soybeans and wheat and oil and gas? Provide services and products like software, Google, and Facebook? In other words do what we do best? And leave the toys and the garments and the b**y strollers to countries where wages are lower and factories and supply chains are already in place? Of course it would. You don’t want to make the USA like India used to be.

https://en.m.wikipedia.org/wiki/Comparative_advantage

Practically, the politicians in both parties aren’t going to allow you to bring in lots of guest workers, and costs are so much higher in the USA than developing countries that building new factories to manufacture textiles and toys and the like doesn’t make sense.

It smells like poop. Don't pull his tail.

that's us today. we're in 2nd place and falling further behind China.

i advocate for dramatic measures to get back into first place in exports, run trade surpluses, and start to pull away from China. otherwise we are destined to be second best.

i agree with Trump and Navarro. i just wish they knew what the hell they were doing. they are utterly incompetent.

Why do you want to build everyday products in the USA? Wouldn’t it be better to use American labor and capital to build airplanes, high end semiconductors, cutting edge medical devices and the like? Produce soybeans and wheat and oil and gas? Provide services and products like software, Google, and Facebook? In other words do what we do best? And leave the toys and the garments and the b**y strollers to countries where wages are lower and factories and supply chains are already in place? Of course it would. You don’t want to make the USA like India used to be.

https://en.m.wikipedia.org/wiki/Comparative_advantage

Practically, the politicians in both parties aren’t going to allow you to bring in lots of guest workers, and costs are so much higher in the USA than developing countries that building new factories to manufacture textiles and toys and the like doesn’t make sense. Originally Posted by Tiny

that's us today. we're in 2nd place and falling further behind China.

i advocate for dramatic measures to get back into first place in exports, run trade surpluses, and start to pull away from China. otherwise we are destined to be second best.

i agree with Trump and Navarro. i just wish they knew what the hell they were doing. they are utterly incompetent. Originally Posted by pxmcc

Fair enough. From now on I'll call them the Trump/Navarro/Pxmcc Tariffs.

"Remember the army of millions and millions of human beings screwing in little screws to make iPhones? That kind of thing is going to come to America!"

--U.S. Secretary of Commerce Howard Lutnick, April, 2025

It’s almost as if the “Left” is rooting for The Chicoms.

Which is likely true since TDS compels them to do so. Originally Posted by Jacky S

Being of a different mindset than DJT, doesn't mean you have TDS; It's more like you're not going to accept the world / political view as Trump see's it. It's that you will accept reality as reality vs. all the bullshit Trumpism's and myopic adverbial phrase or a modifiers such as "like never before". etc.

It in the minds of rational folks, puts him in the same camp as a carnival barker- and sadly- there are red hat folks who love them some carnival schtick.

Trump has to walk back about 50% of his claims- example about talking about Putin to Zelensky- "Maybe he doesn't want to stop the war". and the claims about having talks with China regarding tarrifs and China calling bullshit. - Now that said, I won't claim I don't like the idea's he's trying to get ppl together- but saying he's close to a deal, is like claiming a hooker gave you a firm date after you gave her a deposit. One thing doesn't mean the other.

Nooooooooooooooo.. ha ha.
tariffs? absolutely not, except possibly very specific tariffs on China to combat their fuckery. i support reshoring manufacturing to the U.S. and working toward reducing our trade deficits. giving incentives to industrialists to make it happen and using guest workers to staff the factories so we can be cost-competitive, and U.S. citizens for management and technical positions in those factories. that's my proposal.

if Germany can run a net trade surplus, so can the U.S. no excuses.

and we can't tell Apple, or any other company, where they will make their products. instead, we can encourage companies to reshore by providing the incentives that will make it make sense for them.

same with rebuilding our steel industry. we're going to get killed by China in any long war with China unless we rebuild our civilian steel industry from scratch. that's a national security necessity.

Fair enough. From now on I'll call them the Trump/Navarro/Pxmcc Tariffs.

"Remember the army of millions and millions of human beings screwing in little screws to make iPhones? That kind of thing is going to come to America!"

--U.S. Secretary of Commerce Howard Lutnick, April, 2025 Originally Posted by Tiny

Nooooooooooooooo.. ha ha.
tariffs? absolutely not, except possibly very specific tariffs on China to combat their fuckery. i support reshoring manufacturing to the U.S. and working toward reducing our trade deficits. giving incentives to industrialists to make it happen and using guest workers to staff the factories so we can be cost-competitive, and U.S. citizens for management and technical positions in those factories. that's my proposal.

if Germany can run a net trade surplus, so can the U.S. no excuses.

and we can't tell Apple, or any other company, where they will make their products. instead, we can encourage companies to reshore by providing the incentives that will make it make sense for them.

same with rebuilding our steel industry. we're going to get killed by China in any long war with China unless we rebuild our civilian steel industry from scratch. that's a national security necessity. Originally Posted by pxmcc

... Hey mate - those goals you wish are VERY close to the
same things that President Trump and conservatives want.

... So let's give The President another few weeks
to iron out the tariff situation...

#### Salty

Even our new 51st state hates us now and setting up their government for a big "fuck you" to Trump. I knew China would bring the heat, but now is Canada gearing up to do so as well? That's WINNING!!! LOL

https://apnews.com/article/canada-el...ee3f218568949b

Canadian Prime Minister Mark Carney’s Liberal Party has won the federal election, capping a stunning turnaround in fortunes fueled by U.S. President Donald Trump’s annexation threats and trade war.

Notice how I didn't copy and paste the whole damn article like many of you bandwidth wasting motherfuckers like to do? If you want to read the article, simply click on the link I provided.

Some of us bandwidth wasting motherfuckers post the entire article because the functionally illiterate motherfuckers among us can’t click a link.

Important distinction.