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 Richmans' Trade and Taxes Blog

Pres. Trump Makes His Worst Deal Ever, the Pivot Toward China and Away From Russia 
Raymond Richman, 4/16/2017

Chinese President Xi Jinping taught Pres. Donald Trump a lesson in how to make a deal last week. The deal will do little to reduce the huge trade surplus China enjoys with the USA. China promises what amounts to a trifling increase in imports of coal from the USA at the expense of N. Korea.  Germany and Japan the second and third of our trade partners having a huge trade surplus with the USA, can get the same “deal” by promising to export fewer cars to the USA. They can make them in U.S. plants with the dollars they acquired by decades of huge chronic trade surpluses. Japan has already engaged once in this ploy.  S. Korea, another trade surplus country can make the same deal. The deal will not reduce our enormous trade deficits. China succeeded in getting Trump to tone down the anti-China rhetoric of his election campaign. What did the USA get in return?

China promises to curb North Korea's nuclear program. The deal ensures China that it will be able to maintain a huge trade surplus with the USA. The deal will make Trump’s promise to Make America Great Again impossible because eliminating our trade deficits is essential to restoring economic growth and manufacturing employment. And During the campaign, Donald Trump promised to reduce our foreign involvements.  

And there are other important considerations. Non-Communist Russia has always been a U.S. ally. Even as a Communist nation, she was our ally in World War II. Now we choose to ensure that the only country challenging U.S. economic power, Communist China, is enabled to continue its growth at the expense of the American worker, except for a few coal-miners! China’s economy became second in the world as a result of our misguided trade policies and multi-nationals, like Goldman Sachs, Apple, Hewlett-Packard, Caterpillar, and others, sharing their capitalist technologies with it. U.S. universities trained the creators of the atomic bombs in China and Russia. Russia as an ally did more to win World War II than any other country. So why are we turning on Russia and pivoting toward China, a huge mistake that guarantees the decline of American power and weakens us against former enemies Germany and Japan.

Our trade with China in 2016 consisted of $116 billion in exports and $463 billion in imports, creating a trade deficit of $347 billions, costing us roughly 250,000 good manufacturing jobs. Our trade with Russia consisted of $58 billion in exports and $145 billion in imports for a U.S.  trade deficit of $87 billion, costing us 62,000 jobs. Imports from China include a preponderance of manufactured goods including $133 billion of electrical machinery, other machinery, $104 billion, furniture and bedding, $28 billion, and footwear $17 billion. Our imports from China  displace American manufacturing jobs. Practically none of our imports from Russia are manufactures.

The real winner is S. Korea which we have to defend under present agreement from any attack from N. Korea. What is the benefit to America of that kind of agreement? What is S. Korea paying for our guaranty? On the contrary, the USA is paying hugely in the form of S. Korea's trade surplus with us, $27.7 billion in 2016.

The deal does nothing to prevent China from continuing to grow at the expense of the American manufacturing worker and middle class. Instead, as a result of the deal China will soon overtake the U.S. as the world’s primary industrial power. It will mean that China will become the  primary military power. Pres. Trump’s deal is a deadly disaster for the U.S.

The deal has made it more likely that N. Korea will drag us into a bloody war in S. Korea while China looks on and away.

As for Russian foreign policy, we are responsible for doing nothing to promote U.S.-Russian economic and political relations since Reagan succeeded in breaking up the Soviet Union. To the contrary, we induced many members of the Soviet Federation many bordering Russia to attempt to join NATO created to weaken Russia, we helped overthrow the pro-Russian president of the Ukraine, we got the small Baltic Republics to join NATO, a military alliance directed against a single country, Russia, we intervened militarily in the Yugoslav civil war with the Croatian rebellion financed by Germany and broke the country up into unsustainable independent countries like Bosnia. Thousands dies including children. Russia was no threat to us but we tried to encircle her by moving NATO up to its borders. It appears that the presidents succeeding Reagan, H.W. Bush, Clinton, G.W. Bush, and B. Abama adopted Hitler’s program for world domination and made it ours and Europe’s. These actions, were Russia stronger, would have been considered a casus belli.

But the policy of encircling Russia was doomed to fail and it did. Our intelligence services probably cooked up the story that Assad was using chemical weapons against the rebels, killing children. Even if true, only  a handful were involved. Our  intervention in Iraq brought about thousands of deaths, untold misery, affecting thousands of children, creating millions of refugees which NATO had to deal with and aggravating our own illegal immigration problem.. All these things got Pres. Trump re-elected and now he has pivoted against Russia. Russia, under Putin is a democracy, though not a federation of States, as democratic as a strong government can be, not unlike what we have been becoming with an ever-more powerful central government. China is dominated by the Communist Party. Germany and Japan lost World War II but fascism is the dominant economic model of all the leading national economies, including China. The economic policies of all the big economies are determined by their governments.

The six leading countries with which we had huge chronic trade deficits in 2016 are China, $347 billion, our former enemy Japan, $69 billion, our former enemy Germany, $64 billion, our neighbor Mexico, $63 billion, our former enemy Italy, $28 billion, and S. Korea guaranteed against invasion, $28 billion. These account for $598 billion of our total deficit $734 billion or more than 81 percent. The deal Trump made throws away any possibility of reducing the debt substantially. The pivot toward China, away from Russia, is disastrous. Unless, the USA achieves balanced trade or close to it, America’s future is dim. Needless to say, as an ardent Trump supporter, I never expected him to be so foolish.