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I think it would be valuable to have a first-principles discussion about trade imbalances. For a country, what are the actual downsides of having a trade defic

I think it would be valuable to have a first-principles discussion about trade imbalances. For a country, what are the actual downsides of having a trade deficit? Isn't it great to get stuff shipped to you and not having to ship the same amount of stuff back? In fact, wouldn't a 100% trade deficit be ideal? Have stuff shipped to you without having to ship back anything?

diggan 2y ago
Depends on your goal no? If your goal is to produce nothing and import everything, then I guess your last line fits with that goal. If your goal is to make the country manufacturing independent, then that doesn't sound like a great way of achieving that.
- mindslight 2y ago
  "Produce nothing and import everything" is a straw man. The goal was to produce different things, hopefully more valuable ones. That hope has been shown to be a bit specious. But regardless, being able to obtain real goods by giving other countries arbitrarily-devaluable IOUs is still a no-brainer win, period. If your goal is to make the country manufacturing independent, then plunging us into a depression while cutting off existing supply lines is abjectly stupid! When it comes to building domestic industry from the ground up, tariffs are the equivalent of "sending thoughts and prayers". And they're even more specious knowing how volatile this administration is, and that the economic pain will mandate some course correction long before the foundations of any new factories are even poured. Never mind the cost of filling those new factories with equipment has now skyrocketed! (Or are we supposed to think that the tariff announcement has magically made the invisible hands of the market start rubbing three flattish surfaces together?) The actual way to have carried out the purported policy goal was to spend some of the massive surplus the US gets by USD being the world reserve currency ("the deficit") on deliberate targeted import substitution - direct subsidies for US based manufacturing activities. It's top-down centralized action but that's essentially unavoidable due to that massive centralized wealth collection from having the world reserve currency. That would (/would have) also prevent that collected wealth from simply being given to the financial industry in support of their overgrown products. Breaking up massively consolidated megacorpos into manageable entities that have to actually compete with each other would have gone a long way as well. The only first-principles ways I can earnestly explain Trump's actions is that either he's either confusing symptoms for causes, is mentally compromised (dementia and/or social media addiction), or is working for Russia/China. Likely some mix of all three. Hopefully the Democrats can get over their general ineptitude, spin this as a 30% National Sales Tax paying for Handouts to Most Favored Billionaires, get some Republicans to defect from the maggot party line, and fucking impeach+convict already. That's really the only course of action that can leave our country with a hope of remaining intact.
somanyphotons 2y ago
> Have stuff shipped to you without having to ship back anything? This makes you completely dependent on the whims of a foreign power who might not care for your concerns as their priorities change
- ArtTimeInvestor 2y ago
  As long as they are as dependent on you (Because of military protection and software services) as you are on them, their priorities can't change on a whim.
  - daedrdev 2y ago
    Authoritarian countries don't have to care whats best for their country.
    - ceejayoz 2y ago
      https://en.wikipedia.org/wiki/List_of_heads_of_state_and_government_who_were_assassinated_or_executed https://en.wikipedia.org/wiki/List_of_heads_of_state_and_gov... contains plenty who made the mistake of believing that. https://en.wikipedia.org/wiki/Nicolae_Ceau%C8%99escu https://en.wikipedia.org/wiki/Nicolae_Ceau%C8%99escu serves as a pretty good example.
      - daedrdev 2y ago
        What a stupid argument. They already run dictatorships. They will already be killed or imprisoned if they lose power. Putin for example has invaded Ukraine, and can never lose power or he will be murdered by one of many. Stalin and Mao never lost power despite their insane policies and ruthlessness.
        ceejayoz 2y ago
        > They already run dictatorships. Yes, and as such, their primary threat is large-scale popular unrest. They aren't going to lose an election, they aren't going to be reined in by other branches, they aren't going to voluntarily retire. Which, in general, means you have to at least try to do things that don't piss everyone in the country off. > Putin for example has invaded Ukraine, and can never lose power or he will be murdered by one of many. Great example! He thought it'd go quickly and smoothly. It didn't, and for years now he's avoided the mass mobilization he'd need to win outright, because the regular people would hate it. > Stalin and Mao never lost power despite their insane policies and ruthlessness. Both had to backtrack when they pissed people off too much. https://en.wikipedia.org/wiki/Wuhan_incident https://en.wikipedia.org/wiki/Wuhan_incident "Fears of a more widespread PLA revolt led Mao and his core associates to scale back the movement's most radical components."
skybrian 2y ago
It’s not nothing in return. That’s pretty much impossible, unless it’s pure charity. Countries with a trade surplus are buying foreign investments with their exports. That’s not necessarily a bad thing - more foreign investment can be useful if it’s invested in something productive, and it diversifies risk. But if foreign investors get spooked, it can result in a financial collapse, like happened during the Asian financial crisis.
- shiandow 2y ago
  To simplify a bit further, the core of the issue seems to be that buying lots of foreign goods with currency means a large amount of that currency ends up in foreign hands. Either this money is eventually used to buy stuff or it is invested. The latter is what leads to a trade deficit. Not sure if it is the only way? Put that way it seems dubious if making trade more expensive would actually change things much. Anyone owning dollars still has the same choice between buying goods or investing.
  - skybrian 2y ago
    These foreign investments are mostly not currency. When a foreign country makes a lot of investments in the US, they could be buying stocks, bonds, or making direct investments - such as building US factories, as many foreign auto makers have done. Or buying entire companies - one of the big three US auto makers (Stellantis) is now foreign-owned. Stable countries that have a lot of attractive investments will tend to have a large trade deficit, and the US is one of the more profitable places to invest. (Well, not so much at the moment.)
csomar 2y ago
There is no trade deficit in that sense and can never be; no one is sending free shit. However, this is “goods” trade imbalance. There are lots of other types of cash flows happening in an economy. For example, if your country has a high % of remittances, it’ll have a chronic trade balance. (which is essentially the exercise of these remittances at foreign markets)

diggan 2y ago

Depends on your goal no? If your goal is to produce nothing and import everything, then I guess your last line fits with that goal. If your goal is to make the country manufacturing independent, then that doesn't sound like a great way of achieving that.

mindslight 2y ago
"Produce nothing and import everything" is a straw man. The goal was to produce different things, hopefully more valuable ones. That hope has been shown to be a bit specious. But regardless, being able to obtain real goods by giving other countries arbitrarily-devaluable IOUs is still a no-brainer win, period. If your goal is to make the country manufacturing independent, then plunging us into a depression while cutting off existing supply lines is abjectly stupid! When it comes to building domestic industry from the ground up, tariffs are the equivalent of "sending thoughts and prayers". And they're even more specious knowing how volatile this administration is, and that the economic pain will mandate some course correction long before the foundations of any new factories are even poured. Never mind the cost of filling those new factories with equipment has now skyrocketed! (Or are we supposed to think that the tariff announcement has magically made the invisible hands of the market start rubbing three flattish surfaces together?) The actual way to have carried out the purported policy goal was to spend some of the massive surplus the US gets by USD being the world reserve currency ("the deficit") on deliberate targeted import substitution - direct subsidies for US based manufacturing activities. It's top-down centralized action but that's essentially unavoidable due to that massive centralized wealth collection from having the world reserve currency. That would (/would have) also prevent that collected wealth from simply being given to the financial industry in support of their overgrown products. Breaking up massively consolidated megacorpos into manageable entities that have to actually compete with each other would have gone a long way as well. The only first-principles ways I can earnestly explain Trump's actions is that either he's either confusing symptoms for causes, is mentally compromised (dementia and/or social media addiction), or is working for Russia/China. Likely some mix of all three. Hopefully the Democrats can get over their general ineptitude, spin this as a 30% National Sales Tax paying for Handouts to Most Favored Billionaires, get some Republicans to defect from the maggot party line, and fucking impeach+convict already. That's really the only course of action that can leave our country with a hope of remaining intact.

somanyphotons 2y ago

> Have stuff shipped to you without having to ship back anything? This makes you completely dependent on the whims of a foreign power who might not care for your concerns as their priorities change

ArtTimeInvestor 2y ago
As long as they are as dependent on you (Because of military protection and software services) as you are on them, their priorities can't change on a whim.
- daedrdev 2y ago
  Authoritarian countries don't have to care whats best for their country.
  - ceejayoz 2y ago
    https://en.wikipedia.org/wiki/List_of_heads_of_state_and_government_who_were_assassinated_or_executed https://en.wikipedia.org/wiki/List_of_heads_of_state_and_gov... contains plenty who made the mistake of believing that. https://en.wikipedia.org/wiki/Nicolae_Ceau%C8%99escu https://en.wikipedia.org/wiki/Nicolae_Ceau%C8%99escu serves as a pretty good example.
    - daedrdev 2y ago
      What a stupid argument. They already run dictatorships. They will already be killed or imprisoned if they lose power. Putin for example has invaded Ukraine, and can never lose power or he will be murdered by one of many. Stalin and Mao never lost power despite their insane policies and ruthlessness.
      - ceejayoz 2y ago
        > They already run dictatorships. Yes, and as such, their primary threat is large-scale popular unrest. They aren't going to lose an election, they aren't going to be reined in by other branches, they aren't going to voluntarily retire. Which, in general, means you have to at least try to do things that don't piss everyone in the country off. > Putin for example has invaded Ukraine, and can never lose power or he will be murdered by one of many. Great example! He thought it'd go quickly and smoothly. It didn't, and for years now he's avoided the mass mobilization he'd need to win outright, because the regular people would hate it. > Stalin and Mao never lost power despite their insane policies and ruthlessness. Both had to backtrack when they pissed people off too much. https://en.wikipedia.org/wiki/Wuhan_incident https://en.wikipedia.org/wiki/Wuhan_incident "Fears of a more widespread PLA revolt led Mao and his core associates to scale back the movement's most radical components."

skybrian 2y ago

It’s not nothing in return. That’s pretty much impossible, unless it’s pure charity. Countries with a trade surplus are buying foreign investments with their exports. That’s not necessarily a bad thing - more foreign investment can be useful if it’s invested in something productive, and it diversifies risk. But if foreign investors get spooked, it can result in a financial collapse, like happened during the Asian financial crisis.

shiandow 2y ago
To simplify a bit further, the core of the issue seems to be that buying lots of foreign goods with currency means a large amount of that currency ends up in foreign hands. Either this money is eventually used to buy stuff or it is invested. The latter is what leads to a trade deficit. Not sure if it is the only way? Put that way it seems dubious if making trade more expensive would actually change things much. Anyone owning dollars still has the same choice between buying goods or investing.
- skybrian 2y ago
  These foreign investments are mostly not currency. When a foreign country makes a lot of investments in the US, they could be buying stocks, bonds, or making direct investments - such as building US factories, as many foreign auto makers have done. Or buying entire companies - one of the big three US auto makers (Stellantis) is now foreign-owned. Stable countries that have a lot of attractive investments will tend to have a large trade deficit, and the US is one of the more profitable places to invest. (Well, not so much at the moment.)

csomar 2y ago

There is no trade deficit in that sense and can never be; no one is sending free shit. However, this is “goods” trade imbalance. There are lots of other types of cash flows happening in an economy. For example, if your country has a high % of remittances, it’ll have a chronic trade balance. (which is essentially the exercise of these remittances at foreign markets)