President Trump is ambitious, but our markets are already giving it all they’ve got.
To halve the trade deficit with China, like the White House wants, the U.S. would need to export another $200 billion in manufactured and agricultural goods by the end of 2020. But straightforward economics, a new Wall Street Journal report shows, will make it difficult for American factories and farmers to hit such a political quota.
“The U.S. is operating at full employment,” Chad Bown, a trade economist at the Peterson Institute for International Economics, told the Journal. “There isn’t a tremendous amount of underutilized U.S. capacity.”
In other words, the engine is already firing on all its proverbial cylinders. Take just two examples:
Trump wants to close the trade gap with big jumbo jets. But Boeing already exported $16.3 billion to China last year. One of those aircraft sells between $250 million to $300 million, and there is already a 5,800-jet backlog. Reordering supply chains and production schedules is possible, analysts say, but not practical. The best Boeing could do is send another 10 jets a year to China.
Trump also wants a gas boom to bust the deficit. Assuming huge increases in liquefied natural gas production if the U.S. brings more LNG terminals online, experts predict that at today’s prices exports would be worth about $20 billion. Only a portion of that, of course, would go to China.
The story repeats itself for all sorts of other goods and commodities, whether its semiconductors or soybeans for sale. Central planners can direct, but the economy follows market forces not political mandates. What the White House is asking may be impossible. Who knew trade wars could be so complicated?
