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The iPhone shows that Trump is misreading trade deficits and what they mean

“As a result, much of that $70 billion U.S.-China cellphone trade deficit really comes from other U.S. trade partners, such as South Korea, Japan and Singapore” writes John W for cnbc.com. “Last year, we lost $500 billion on trade with China,” Trump said, erroneously, at a March 23 news conference.Some $70 billion of the U.S. trade deficit with China is from shipments of cellphones.To see why, you have to understand how Trump’s policy apparently misreads the reasons the U.S. runs a trade deficit in the first place.A trade deficit occurs…

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Trump is getting nowhere with Europe and China on widening trade deficits

“Still, despite Trump’s promises, there was no narrowing of deficits with any of America’s main trade partners” writes unknown author for cnbc.com. The trade deficit with Japan also increased 5.3 percent.Over the same period, the trade gaps with the European Union and China widened at annual rates of 17.5 percent and 11.6 percent, respectively.Here is what’s happening to U.S. trade accounts under Trump’s stewardship: Last year, America’s deficit on goods trade widened to $810 billion, marking an annual increase of 7.6 percent, after a 1.3 percent decline in 2016. Source: cnbc.com…

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CBO predicts much larger deficits than Trump White House

“WASHINGTON (MarketWatch) – An independent review of President Trump’s proposed 2019 budget proposal estimates that future deficits would be twice as large as the White House projects” writes Jeffry Bartash for marketwatch.com. The White House had predicted the deficits would total $450 billion in 2027 and $445 billion in 2028.In a report issued Thursday, the CBO concluded government spending would be higher and tax revenues lower than the White House predicts. Lower tax revenue would stem in part from the Trump tax cuts. Source: marketwatch.com Share This:

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China is an easy political target, but the trade problem lies elsewhere

“U.S. negotiators are fixated on targeted reductions of around $200 billion in the bilateral trade imbalance over a two-year time frame” writes Stephen S for marketwatch.com. That points to rising balance-of-payments and multilateral trade deficits, which are impossible to resolve through targeted bilateral actions against a single country.The Trump deal would shift the Chinese piece of America’s multilateral imbalance to higher-cost imports from elsewhere — the functional equivalent of a tax hike on American families.Trade deficits, goes the argument, lead to job losses and wage compression. Source: marketwatch.com Share This:

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The Fed is an open book, but foreign trade and security are the wild cards

“Anybody capable of reading the Fed’s balance sheet can get an instant fix on what the American monetary authorities are up to” writes Adam Jeffery for cnbc.com. The difficulty here is that the Fed, and the Fed observers, must operate with expected — i.e., short-term forecast — values of these two policy variables.There is no need to bother with “forward guidance” — a bunch of confusing and contradictory statements serving as betting fodder for in-out trades and the Fed’s trail covers between bi-weekly reserves reporting periods. Source: cnbc.com Share This:

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Is King Dollar really under threat? I hope so.

“First, they allowed us to run large, persistent trade deficits” writes Jared Bernstein for washingtonpost.com. Could this process lead to the U.S. dollar no longer reigning supreme as the dominant currency in global commerce?. Inward capital flows strengthen the dollar, which makes our exports more expensive and our imports cheaper.Having our currency be the premier reserve currency — the one that countries most want to hold to transact business and protect against shocks — has benefits and costs (dollar reserves are about 63 percent of global reserve holdings). Source: washingtonpost.com Share…

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Americans are taking on more of the burden for funding record U.S. deficits

“With the stock market seeing a sharp run-up last year, pension funds also need to shift those gains into bonds to rebalance their asset allocations” writes Sunny Oh for marketwatch.com. The responsibility for funding the U.S.’s yawning budget deficits is increasingly falling on the shoulders of domestic investors.When rates are falling, bond investors are more willing to snap up debt on the prospect that yields will fall even further, driving prices higher.Analysts hinted that Mnuchin may have been disingenuous as he neglected to mention that a bump in supply, but…

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Trump won’t stop talking about trade deficits. Don’t rule out a trade war until he does.

“But there’s one big reason it might be premature to relax about a trade war: President Trump is still obsessed with trade deficits” writes Heather Long Is for washingtonpost.com. They point out that the U.S. economy has continued to grow, even though it has run a trade deficit since 1975.The options to shrink the trade deficit are all unpleasant: a recession, less spending or heavy protectionism.Since taking office, Trump has tweeted 15 times decrying large trade deficits, most recently on April 4.To Trump, the trade deficit is a sign of weakness…

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Dissecting House Speaker Ryan’s remarks on deficits and spending

“In 1968, when tax revenue was 17 percent of GDP, mandatory spending was 6.4 percent; in 1978 and 1988, tax revenue was about 17.5 percent and mandatory spending was about 9.6 percent” reports washingtonpost.com. So the practical effect is that the $1 trillion deficit moved up two years.Here, Ryan says that tax revenue will continue to rise despite the tax cuts. Source: washingtonpost.com Share This:

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Dissecting Paul Ryan’s remarks on deficits and spending

“In 1968, when tax revenue was 17 percent of GDP, mandatory spending was 6.4 percent; in 1978 and 1988, tax revenue was about 17.5 percent and mandatory spending was about 9.6 percent” reports washingtonpost.com. So the practical effect is that the $1 trillion deficit moved up two years.Here, Ryan says that tax revenue will continue to rise despite the tax cuts. Source: washingtonpost.com Share This:

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