In the first Presidential debate, Hillary Clinton and Donald Trump managed to agree on one thing. Unfortunately, they were both wrong.
What they agreed about is that trade deficits are due to “bad trade deals.” Clinton said “we need to have smart, fair trade deals” and “hold people accountable.” Trump said, “We have to renegotiate our trade deals.” Hillary voted against CAFTA, while Trump hates NAFTA. Both dismissed the Trans-Pacific Partnership as just another foolish trade agreement.
The trouble is our largest trade deficits are with countries with which the U.S. has no trade agreements – namely China ($334.1 billion in 2015) and the European Union ($102.9 billion). We also have no trade deal with Japan, which is tied with Mexico for a poor third place ($55-58 billion) far behind Germany ($77.3 billion)
In other words, three of our four biggest trade deficits have nothing to do with trade agreements because such agreements don’t exist. Trump can’t “renegotiate” trade deals that were never negotiated.
The U.S. also has trade surpluses. We ran a $31.7 billion trade surplus with Hong Kong last year, which is obviously part of China. We ran a $6.1 billion surplus with Canada, $10.4 billion with Singapore, $12 billion with the U.K., $30.9 billion with OPEC countries, and $87 billion with South and Central America, plus $28.9 billion with various “other countries.” Although a few trade surplus partners have Free Trade Agreements with the U.S. (Singapore, Canada and CAFTA), it would be incongruous if not ridiculous to attribute both surpluses and deficits to trade agreements.
In short, this entire bipartisan hullabaloo about some alleged link between trade deals and trade deficits is simply false – political fiction.