{"id":44496,"date":"2018-08-12T05:00:40","date_gmt":"2018-08-12T09:00:40","guid":{"rendered":"http:\/\/quotulatiousness.ca\/blog\/?p=44496"},"modified":"2018-08-11T11:10:45","modified_gmt":"2018-08-11T15:10:45","slug":"misunderstanding-what-the-trade-deficit-represents","status":"publish","type":"post","link":"https:\/\/quotulatiousness.ca\/blog\/2018\/08\/12\/misunderstanding-what-the-trade-deficit-represents\/","title":{"rendered":"Misunderstanding what the trade deficit represents"},"content":{"rendered":"

In a post from last week, Tim Worstall<\/a> explains why Donald Trump is wrong about the economic impact of a trade deficit:<\/p>\n

\"\"<\/a><\/p>\n

I should note here that I didn\u2019t, because as a foreigner I can\u2019t, support The Donald at the last election. But I didn\u2019t support Hillary even more. So this is more about really, actually, insisting that Trump is wrong on trade issues rather than just the more general he\u2019s wrong about everything common in the US press.<\/p>\n

[…]<\/p>\n

What Trump, DiMicco and Navarro are getting wrong is this, the GDP equation.<\/p>\n

Y = C+I+G+(X-M)<\/strong><\/div>\n

GDP is consumption plus investment plus government spending plus the trade balance \u2013 and minus it if there\u2019s a trade deficit. So people look at this and think yep, if there\u2019s a trade deficit than that makes Y<\/strong>, GDP, smaller!<\/p>\n

But this is a mistake, an error. For, as the textbook immediately goes on to explain, what is it that we do with imports? Well, we either consume them, use them in investments or government buys them. So all imports are already in C<\/strong> and I<\/strong> and G<\/strong>. Meaning that if we don\u2019t deduct them we\u2019ll be double counting them. So, to avoid double counting we subtract them.<\/p>\n

Trump and his advisers are simply wrong on this. The trade deficit doesn\u2019t reduce the size of the economy. They\u2019re getting it wrong simply because they\u2019re not reading the second page of the explanation of the GDP equation.<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"

In a post from last week, Tim Worstall explains why Donald Trump is wrong about the economic impact of a trade deficit: I should note here that I didn\u2019t, because as a foreigner I can\u2019t, support The Donald at the last election. But I didn\u2019t support Hillary even more. So this is more about really, […]<\/p>\n","protected":false},"author":1,"featured_media":35193,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[25,53,13],"tags":[1037,1094,1093,266],"class_list":["post-44496","post","type-post","status-publish","format-standard","hentry","category-economics","category-politics","category-usa","tag-donaldtrump","tag-gdp","tag-macroeconomics","tag-protectionism"],"jetpack_featured_media_url":"https:\/\/quotulatiousness.ca\/blog\/wp-content\/uploads\/2016\/06\/favicon.png","jetpack_shortlink":"https:\/\/wp.me\/p2hpV6-bzG","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts\/44496","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/comments?post=44496"}],"version-history":[{"count":1,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts\/44496\/revisions"}],"predecessor-version":[{"id":44497,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts\/44496\/revisions\/44497"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/media\/35193"}],"wp:attachment":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/media?parent=44496"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/categories?post=44496"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/tags?post=44496"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}