US kicks itself in teeth with trade aggression

Although the longer-term trade balances of the United States remain unknown, the July data at least should caution the Donald Trump administration that its hawkish trade policy may be backfiring.

President Trump has always argued that the colossal trade deficits come from other countries' "unfair" trade practices. But this conveniently excuses the fact that the US' domestic savings rate has been consistently low in the past decades. Which, as many mainstream economists have pointed out, means that Americans spend too much and demand imports to support their consumption habits.

The president has also ignored the evolving trend of the international division of labor, which has led to a large number of US multinationals transferring their production to other countries, especially East Asian economies. Rather than China exporting its oversupply and low wages as the administration claims, it is "exports" of these companies to the US that account for much of the overall trade deficit.