Here’s a letter to the New York Post.
Editor:
You report that President Trump travelled to Pittsburgh to “tout” what he takes to be his achievement of having Nippon Steel invest $14 billion in U.S. Steel (“Trump doubles steel tariffs to 50%, slams ‘shoddy’ Chinese products while celebrating Nippon’s $14B investment in America,” May 30). Forget that Nippon’s initial offer to make a similar investment came when Pres. Biden was in office. Forget also that it’s cheeky for a government official to claim credit merely for allowing private companies to do what these companies would do anyway absent government interference.
Instead, recognize that Mr. Trump, by boasting about this large foreign investment in the U.S., boasts about an increase in the U.S. trade deficit – something he often insists he wants to shrink. With this boast, the president again reveals that he doesn’t understand that, because dollars that foreigners invest in the U.S. are dollars that foreigners don’t spend on U.S. exports, more foreign investment in the U.S. works against his desire to lower U.S. trade deficits.
As an American who grasps the basic economics of trade, I welcome U.S. trade deficits. These ‘deficits’ – another name for which is capital-account surpluses – reveal global investors’ confidence in the U.S. economy, and they also enlarge the size of America’s capital stock. Mr. Trump is right to applaud Nippon’s investment here. But the president’s obvious obliviousness to the most basic realities of international commerce is troubling.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
