It seems as though the US may not be as ahead of the trading game as we thought.
US President Trump’s White House trade adviser Peter Navarro has penned an article in the Wall Street Journal, defending the administration’s approach to global trade and ‘free and fair’ trade agreements. The piece, named ‘Why the White House worries about trade deficits’, pin-points the main factors the US need to move to new markets and one-on-one trade deals.
Navarro stated how he believes the US is losing its grip on the economy, sharing his view on trade deficits and how it hurts growth and affecting GDP growth.
“Do trade deficits matter? The question is important because America’s trade deficit in goods is large and persistent, about $2 billion every day”, he wrote.
Navarro’s narrative may be interpreted to be slightly paranoid, stating the country may not be as prepared and ready for global innovation and changes.
“The economic argument that trade deficits matter begins with the observation that growth in real GDP depends on only four factors: consumption, government spending, business investment and net exports (the difference between exports and imports). Reducing a trade deficit through tough, smart negotiations is a way to increase net exports – and boost the rate of economic growth.” Navarro added.
Trade and industry experts have argued that a trade deficit is not an important factor for GDP growth. According to Bloomberg, labour-force growth and labour-force productivity are the two main factors for GDP growth, which are widely accepted by economists, not trade deficits.
Prior to his opinion article in the Wall Street Journal, Navarro had already stated that one of the main goals of the Trump administration was to “reclaim all of the supply chain and manufacturing capability that would exist if the playing field was even” at an economists conference in Washington, on Monday.
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