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#tradedeficit

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Even then, the ultimate transformations of the #tariffs are unknown & could play out over months, if not years. Many economists say the risk is that the #US #economy is steadily eroded rather than collapsing instantly.

#Trump has promoted the tariffs as a way to reduce the #TradeDeficit. But importers sought to avoid the taxes by importing more goods before the taxes went into effect. As a result, the $582.7 billion #trade imbalance for the first half of the year was 38% higher than in 2024.

"Since the Seventies, America’s deficits have provided East Asia (first Japan, then China) and Europe (primarily Germany) the demand for their factories’ manufactures. In return, the European Union, Japan and later China sent their accumulated profits to Wall Street to be recycled into US private and public debt, some equities, and real estate. A Chinese official once described this mechanism to me as a “dark deal”. “Our Dark Deal with the Americans,” the official explained, “turns on the US trade deficit, which keeps demand for our manufactures high. In return, our capitalists invest the bulk of their dollar superprofits into America’s FIRE”. (The acronym stands for “Finance, Insurance, and Real Estate.”) “Once this process got underway, America shifted much of its industrial production to our shores.”

The problem with this global recycling mechanism was that, to function smoothly, it had to generate larger and larger imbalances: greater trade deficits for the US and more accumulated savings for Northern Europe and East Asia. But there are limits to how large imbalances can grow. Ruptures are inevitable. The longer they are delayed, the greater the pain they inflict — a truth that centrists never acknowledged, not even when it was tearing down their houses.

Trump’s greatest strength comes from asking the pressing question that the centrists refuse to countenance: what comes after the Dark Deal? What comes after the imbalances built on the US trade deficit have proven unsustainably massive? Scott Bessent, Trump’s Treasury Secretary, put it succinctly in a recent speech at the IMF: “Everywhere we look across the international economic system today, we see imbalance… This status quo of large and persistent imbalances is not sustainable… The persistent over-reliance on the United States for demand is resulting in an evermore unbalanced global economy.”"

unherd.com/2025/05/the-centris

UnHerd · The centrist comeback won’t lastAv Yanis Varoufakis
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In his post taking aim at #Canada, #Trump again cited a figure he framed as a “subsidy” the #UnitedStates gives its neighbor. The number he gave, $200 billion, appears to be a reference to the US’ #TradeDeficit with Canada. But that is vastly inflated: Last year, the #US had a $63.3 billion trade deficit with Canada, according to US official data. The US ran a trade #surplus with Canada if you excludes Canadian #oil exported to America.