Posts Tagged ‘Balance of Trade’

What’s behind Trump’s demands on NATO?

July 18, 2018

Click to enlarge

President Trump last week demanded that NATO allies, who have already pledged to increase their military spending to 2 percent of GDP by 2024, raise their spending to 4 percent.

This is supposedly necessary to defend against Russia.  Whether or not he really thinks Russia is that much of a threat, the fact is that the European members of NATO already outspend Russia by a considerable amount.

According to the Stockholm International Peace Institute, Russia’s spending military spending last year was $66.3 billion, down from $69.2 billion in 2016.

France spent $57.8 billion, the UK spent $47.2 billion and Germany spent $44.3 billion—a combined total of $149.3 billion, more than double what Russia spent.  Estimated US spending was $610 billion.

The International Institute for Strategic Studies made different but similar estimates.

Its estimate was that Russia spent $61.2 billion last year, while the UK spent $50.7 billion, France spent $48.6 billion and Germany spent $41.7 billion—a combined total of $141 billion, also more than double Russia’s.  The IISS estimated that US spent $602.8 billion.

So what was the purpose of Trump’s demand?  I think it was to increase sales by the U.S. armaments industry.

I think his motivation was the same for his criticism Germany for importing 70 percent of its natural gas from Russia and planning a second natural gas pipeline across the Baltic.

His goal is to have Germany import American liquefied natural gas (LNG), despite its higher cost and current lack of suitable infrastructure.  Russia is just an excuse.  He wants American companies to get Germany’s business.s.

The European Union countries are competitors of the United States in world trade.  Hence his hostility to the EU.   Russia is not.  Hence his lack of hostility to Russia.

Donald Trump sees foreign affairs in terms of trade, and trade in terms of making deals. That is shortsighted.  The way for the United States to regain our advantage in world trade is by building up our own industry, not by demanding other countries do things that are not in their own interest.


The anatomy of the U.S. balance of trade

March 9, 2016


Source: How Much

The U.S. Census Department reported that the United States exported more than $1.5 trillion worth of goods and services in 2015 and imported more than $2.2 trillion worth, leaving a trade deficit of $735 billion dollars.

The map above and the two below, produced by How Much, a cost information web site, shows the flow of trade into and outside the United States last year.

The red countries are countries with which the United States has a trade deficit.  They sell us Americans more than they buy from us.  The green countries are countries with which the United States has a trade surplus.  They buy more from us Americans than they sell to us.



A couple of things jump out at me as I look at the three maps.

The oil-exporting countries – Saudi Arabia, Algeria, Nigeria, Venezuela, even Canada – are not large on the map.  Our U.S. trade deficit is mainly in manufacturing, not energy.  Domestic production satisfies about 85 percent of U.S. energy needs.

The United States has trade deficits with many countries, such as Germany, France, Sweden and Canada, that have generous welfare states, strong labor unions and high wages.  I don’t think impoverishment of American workers is not the key to a favorable balance of trade.

The North American Free Trade Agreement has not improved the U.S. trade balance with Canada and Mexico, and I can’t think of any other trade agreement since then that has done so with any other country.

Afterthought [3/10/2016].  The United States does a free trade agreement and a positive trade balance with Colombia, but I’m not sure what the balance would be if the revenues of the cocaine trade were included.