From Goldman Sachs, “How Easy Is It to Win a Trade War?” (Stehn/Hatzius) today:

Thanks, Trump!

Source: ino.

That’s HTS code 84799041, on the Section 301 hit list released today. Mr. Trump has the thanks of a grateful Nation for stopping intellectual property theft in this important category.

The entire list is here.

There’s a 30 60 day consultation period. Since around $50 billion of goods is targeted, China will likely impose proportional measures if and when retaliation occurs.

Because the value added of Chinese exports to the United States is fairly low (i.e., exports incorporate lots of foreign components), it is unclear how much damage would be inflicted on bystanders. Wells Fargo uses data on trade in value added to show Taiwan’s exposure.

Continue reading →

Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers. This is an extended version of a column that appeared at Project Syndicate on March 19.

Continue reading →

Is the trend more important than if there is actually a surplus or deficit, as one commenter suggests? On a bilateral basis, I don’t think either is particularly important, but as a matter of fact I think we need to verify that the US-Canada bilateral trade balance in goods and services is (barely) positive in 2017, and trending upward on a quarterly basis.

Figure 1: US-Canada trade balance in 000’s US$, s.a. (blue), and 12 quarter trailing moving average (red). NBER defined recession dates shaded gray. Source: BEA, NBER, author’s calculations.

Figure 1: Real GDP growth, actual (bold black), forecast of NY Fed Nowcast 3/16 (green), Atlanta Fed GDPNow 3/16 (red), Goldman-Sachs 3/19 (red), Macroeconomic Advisers 3/16 (blue), Merrill Lynch 3/19 (blue), q/q SAAR. Source: CR, Macro Advisers, Goldman-Sachs.

GDP growth in Q1 has been lower in the past years, few consistent with residual seasonality.

My view is that if we pay hundreds of millions of dollars per year (we should probably spend more) on collecting and analyzing economic data, we should use that data. Yet, when Mr. Trump debates trade policy with the Canadian prime minister, by his own admission he makes up numbers.

Continue reading →

Mr. Trump holds forth on how he interacts with other heads-of-state (from TIME):

And by the way, Canada? They negotiate tougher than Mexico. Trudeau came to see me, he’s a good man, he said we have no trade deficit with you, we have none. Donald, please. Nice guy, good looking guy. Comes in. Donald we have no trade deficit. He’s very tough. Everyone else, getting killed or whatever. But he’s tough. I said, well Justin, you do. I didn’t even know. Josh, I had no idea. I just said you’re wrong. You’re wrong. It was so stupid. [LAUGHTER]. I thought it was fine. I said, you’re wrong Justin. He said, nope we have no trade deficit. I said, well in that case I feel differently. I said but I don’t believe it. I sent one of our guys out. His guy, my guy. They said check because I can’t believe it. Well, sir you’re actually right, we have no deficit but that doesn’t include energy and timber. [LAUGHTER]. Well you don’t have timber, and when you do we’ll lost $17 billion. It’s incredible.

USTR notes that the 2016 bilateral trade balance between the US and Canada is +12.9 billion.

And yet there are still people (such as Rick Stryker) who will write:

I believe that Trump is the most honest politician we’ve seen or probably will see in our lifetime.

For this portion of the population, facts will remain irrelevant.

Figure 1: Goods trade balance (blue), and trade balance (red), in billions of $, SAAR. Orange shading denotes 2017M01-onward. Source: BEA/Census, author’s calculations.

I think I’ve had enough of “winning so much”.