Here’s a letter that I sent several days ago to the Washington Post (which was not published there):
Editor:
About its new trade deal with Switzerland, the White House notes that it commits the Swiss to increase their investments in the U.S. (“Switzerland to boost US investment as deal struck to lower US tariffs on Swiss goods to 15%,” November 14). The White House boasts that “this deal with Switzerland” – a country with which the U.S. currently runs a trade deficit – “will put us on a path to eliminate that deficit by 2028.’’
Facepalm.
Forget that in our world of more than two countries a U.S. trade deficit with any individual country is as economically meaningful as is Mr. Trump’s “trade deficit” with his dentist. Instead recognize that, to invest more in the U.S., the Swiss need more dollars to do so. To get these dollars, the Swiss will spend fewer dollars buying U.S. exports. And so by promising to increase their investments in the U.S. the Swiss promise to increase – not to decrease, and much less to eliminate – Switzerland’s trade deficit with the U.S.
It’s painful to encounter this administration’s unalloyed ignorance of the basic realities of international trade.
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
