TRUMP AND TRADE DEFICITS
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TRUMP AND TRADE DEFICITS
9th July 2018 @ 1:00 pm - 2:00 pmFree
SPEAKER: Dr Linda Yueh, economist and author
As we anticipate the visit of President Donald Trump to the UK, many are wondering (and worrying) that his brand of America First will see increasing pressure on the UK, particularly in the form of tariffs.
As always, the US leader will most likely focus on trade deficit between the US and UK to justify his measures. But is this reasonable? Like the US, the UK has a longstanding trade deficit. This issue has prompted the US President to take a series of protectionist measures. When should trade deficits matter? Should Britain be worried about its trade deficit with the US?
By kind invitation of The Rt Hon. The Lord Risby, The Henry Jackson Society is proud to welcome Dr. Linda Yueh who will talk about the troubles of globalisation and what we can learn from Brexit and Trumpism.
Dr Linda Yueh is Fellow in Economics, St Edmund Hall, University of Oxford and Adjunct Professor of Economics, London Business School as well as Visiting Senior Fellow at the IDEAS research centre, the foreign policy think tank at the London School of Economics. She is the author of The Great Economists: How Their Ideas Can Help Us Today.
On the 9th of July the Henry Jackson Society was please to host Dr Linda Yueh, a fellow in economics at St Edumund Hall, University of Oxford and adjunct Professor of Economics at London Business School, she sat alongside Jason Pearlman, Deputy Director of the Henry Jackson Society.
By kind invitation of the Rt Hon. Lord Risby, Dr Yueh led an insightful discussion about when trade deficits matter and when they do not.
Dr Yueh opened the discussion by speaking about an opinion poll she conducted on Twitter. She posed to question: Do trade deficits matter? 36% of respondents said ‘Yes’, 25% said ‘No’, and 39% said it depends. The poll showed just how spread out opinions on trade deficits are.
Dr Yueh agreed with the plurality of respondents because ‘it depends’. If the trade deficit reflects an underlying problem within an economy, then the trade deficit matters. If the trade deficit is the result of services, then it matters very little. The thing about services is that they are rarely tradeable. For example, a haircut is a service and very few people travel to another country to get their hair cut.
This means that the most efficient way for a country to reduce a trade deficit is to open their markets. When a country opens their markets it does two things: It first, allows an easier flow of services between more countries. Second, it then makes that country become a hub for trade and goods flow into their country. A perfect example is Sweden becoming a hub after negotiating a free trade agreement with China.
The main problem now is that President Trump is focussed on goods rather than services. A majority of the American economy is dependent upon services, not goods. When the United States enacts tariffs it actually hurts the trade deficit rather than helping the deficit because it restricts the free flow of services.
The event closed by Lord Risby thanking Dr Linda Yueh for a wonderful talk.
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