Trump’s Cringeworthy Trade Letters And His Ignorance on Trade Deficits
Trump’s trade letters, posted on Truth Social and detailed by the White House are a clownish display of economic ignorance, fixating on bilateral trade deficits as evidence of America being “taken advantage of.” These letters reveal a shocking fundamental misunderstanding of trade and deficits, risking inflation, retaliation, and economic chaos. Worse, advisors like Steve Miran, Kevin Hassett and Scott Bessent, once respected economists, stand silent, endorsing this folly through inaction and trashing their legacies.
What Is a Total Trade Deficit?
A total trade deficit occurs when people and businesses in the U.S. buy more goods from all other countries combined than those countries buy from us. It’s not a sign of being “taken advantage of.” It simply means Americans are wealthy enough to buy things that improve their lives—electronics from Japan, coffee from Thailand, or clothes from elsewhere. When we buy more than we sell, other countries end up with our dollars. Those dollars don’t disappear; they come back as investments in the U.S., like factories or businesses, creating jobs here. This is called a capital surplus, and it’s a natural outcome of trade. It’s not a sign of being “taken advantage of.” It’s just individuals and companies making choices to buy what’s best for them—whether it’s cheaper electronics from Japan or coffee from Thailand.
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Imagine you buy clothes from a store, but the store doesn’t buy anything from you. And you buy food from a grocery store, and they don’t buy anything from you. In all of these cases, you are buying things from places that don't buy anything from you. At the same time, you are getting income from your employer, and they aren’t getting income back from you. For a person, the ins and outs tend to be the same, but they don’t have to be. You could have more money going out than coming in, in which case you borrow to buy what you want. Or you could have more money coming in rather than going out, in which case you invest the difference. Would you call that unfair? Of course not. Far from being bad, a total trade deficit reflects American prosperity and global confidence in our economy.
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Trump’s letters, like one to Japan shared on Truth Social, demand a 25% tariff to “eliminate the Trade Deficit disparity.” Another to Thailand scolds their “persistent Trade Deficits” and demands they build factories in the U.S. This logic fails spectacularly. First, tariffs don’t fix deficits—they often backfire. A 2018 Federal Reserve study found tariffs targeting deficits reduce both imports and exports, leaving no net gain. Second, demanding foreign factories in the U.S. actually requires a trade deficit to give the foreigners dollars to invest in the U.S. Foreign companies need dollars in order to build here, and they get those dollars by selling us more goods—widening the deficit as they import capital goods and materials to set up production.
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Once again, to drive the point home, in response to Trump’s insane ambitions, trade deficits aren’t bad. They mean Americans are wealthy enough to buy things that make life better—phones, clothes, coffee. When we buy more from other countries, they get our dollars. Those dollars don’t vanish; they come back as investments. Foreign companies use them to build factories or buy U.S. assets, creating jobs here. The real issue is U.S. fiscal policy, not foreign trade practices. And fears of foreigners “owning everything” is nonsense. Foreign investment in the U.S. is a tiny fraction of our economy’s total wealth, dwarfed by what Americans invest domestically.
What are Bilateral Trade Deficits and Why they Are a Misguided Focus?
A bilateral trade deficit is when the U.S. buys more from a specific country, like Japan or Thailand, than that country buys from us. Trump’s letters fixate on this, demanding countries balance trade with the U.S. individually. This is economically nonsensical. Imagine you buy bananas from a tropical country because we don’t grow them here. That country might not want our high-tech goods, like software or jets, preferring to buy rice or clothes from elsewhere. Expecting every country to buy exactly as much from us as we buy from them is like demanding your grocery store buy your old couch because you bought their apples. It’s absurd. Global trade thrives because countries buy what they need from whoever offers the best deal, not because every bilateral ledger balances. Trump’s letter to Japan, shared on Truth Social, demands a 25% tariff to “eliminate the Trade Deficit disparity,” while another to Thailand scolds their “persistent Trade Deficits” and urges them to build factories in the U.S. This ignores reality: building factories here are done with money accumulaed from a trade deficit. If there were no trade deficits, foreign countries would have no dollars to build factories here.
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Yet, Trump’s lunatic rants threaten higher costs for consumers and global trade wars. His juvenile tone invites ridicule, but the real outrage is the silence of advisors like Kevin Hassett, former CEA chair, Steve Miran, who served in Trump’s first term as a senior advisor for economic policy at the Department of the Treasury, his current Chairman of the Council of Economic Advisers since March 2025, and Scott Bessent, Treasury Secretary. All once championed data-driven economics, yet they’ve offered no pushback as Trump peddles mercantilist nonsense. Bessent’s vague claim on Bloomberg about tariffs setting a “fair baseline” is spin, not reality. Peter Navarro’s protectionist influence goes unchecked by free-market voices like Hasset, Bessent, and Miran. Their inaction has consequences: screwing up supply chains, increasing inflation and stifling growth.
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Trump’s trade letters are economic malpractice, rooted in a childish misunderstanding of trade. Miran, Hassett and Bessent’s silence betrays their expertise, cementing their complicity in a policy that threatens American prosperity. As tariffs loom, their failure to speak out ensures history will judge them as enablers of one of America’s worst economic missteps.