Trump’s Deficit

Donald Trump is complaining about constant USA trade deficits. This is a valid concern. If you check countries, you’ll find that Germany’s trade surplus is greater than that of the EU overall. The USA has always had a deficit overall, as has Canada.

Why are there trade deficits? Clearly, the USA as a whole buys more (in dollar terms) than it sells. How did this happen?

The book, Information Feudalism, is mentioned in the References pages of this website. I leave you to navigate there at your leisure. I will summarize a few points from that book.

  • The USTR and the DOHA round of trade negotiations focused on making copyright and patent rights enforced all over the world.
  • A company like Apple (no special reason to pick them, but I have the figures we need in mind) can sell an item for $3x and keep $2x of that for itself. Patent licensees build the product, acquire the necessary components and materials, pay their workers and various bills, on the remaining $x.
  • The jobs to do this are in the countries where the patents etc are licensed.
  • One third of the gross price goes to those same countries. This money may not come back to the USA as purchases.
  • Two thirds of the gross price comes back to the US parent, assuming they don’t launder or tax evade (not a good conclusion overall, eh?).
  • What does come back goes to the elites: Company executives, board members, stock option holders, and shareholders. It does not come back to the man in the street.
  • It is entirely possible for a company to decide where to license a patent and thus where to manufacture or assemble a product. American companies do not choose to do this in the USA if it can be done cheaper elsewhere. Hong Kong and Bangladesh, Japan and Korea, etc etc. There are few patriotic decisions made in board rooms.

The president who campaigned on cleaning up the swamp has a White House team composed pretty much entirely of swamp denizens and swam owners. They want their constant flows of income. Those flows are based on free trade and patent and copyright protection.

Therefore the USA will always have a trade imbalance.

Do you think the POTUS can override corporate self-interest? Did he try to buy this with his (imho disastrous) corporate tax cuts? Will anyone bought stay bought?


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