I just did the numbers and this assumption looks to be completely right. Let’s pause for a minute and consider how INSANE this is. 🧵
If you calculate another country’s tariffs as “trade deficit as a percentage of my imports from them” — what Trump is doing with $3 TRILLION of US merchandise imports — you are positing a relationship that makes no sense once you sit down and think about it for five seconds. That’s because countries import and export DIFFERENT PRODUCTS. That is the whole point of trade. The US imports a lot of smartphones from China. The US exports a lot of soybeans to China. What are the non-tariff barriers that China could implement that affect its demand for soybeans? Pretty obviously none. Chinese soybean demand is driven largely by its animal feed industry (livestock and poultry eat soybean meal) and to some extent by conditions in the global cooking oil market (because soybean oil is left over from the soya meal). If Americans’ income rise and they spend more on smartphones, that is not going to automatically cause Chinese people to increase their spending on soybeans by the same amount! It actually gets more insane if you expand it from just smartphones and soybeans to all the products traded between the two biggest economies. The only place this makes a smidgen of sense is when you look at the one product where both countries are competing in a large-scale single market: government debt. That’s why trade economists would argue trade imbalances aren’t caused by tariffs and non-tariff barriers, but by surpluses and deficits in the capital and financial account. America has a persistent trade deficit because global investors have a persistent appetite for US government (and corporate) debt. This is good for the US economy. It’s also why the US is by far the biggest recipient of foreign investment in the world, and why the biggest foreign direct investors are US allies with which the US has a current account deficit. Cluelessly blundering through the trade data without an elementary-level understanding of what it actually means, the Trump administration is doing its best to kill off the thing that makes the US such a strong economy. It’s truly shocking. (ends) Postscript with my workings here: bsky.app
Here is the data in chart form — meant to send this earlier but was away from my desk.
Full credit for James Surowiecki (not here, he’s on X) for spotting this.