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| Posted by: Paul Donovan | Tags: Paul Donovan

The US trade deficit widened. This is no surprise. US President Trump's policies have been designed to widen the deficit (or, Make China Great Again). Deficit financed tax cuts will be partially spent on imports. The trade and current account deficits mean Americans enjoy a higher standard of living.

US President Trump plans taxes on another USD 100bn of imports from China. China has not responded (it is Tomb-Sweeping Day in China). China could not impose taxes on a total of USD 150bn of US imports, because China does not buy USD 150bn of US imports. To be fair, no country bar Mexico and Canada buy as much as USD 150bn of US imports.

US President Trump threatened trade disputes with the rest of the world by offering to subsidize US farmers. That may prompt talk of retaliation. However, this is not a trade war. These are threats for the future, not real policies now. The Trump trade taxes to date have been largely invisible to the US consumer. The wider the tariffs, the more likely the US consumer realizes they are being taxed, which has political consequences.

The US employment report is also due today. In the real world, things are doing fine.