Why Should Wisconsinites Care About a Shrinking Trade Deficit?

Why Should Wisconsinites Care About a Shrinking Trade Deficit?

  • The U.S. trade deficit with China dropped 28 percent in February
  • According to Time Mag, the shrinking trade deficit signals good things about the U.S. economy
  • How does a shrinking trade deficit impact you in Wisconsin?

Remember all those tough trade negotiations that have been going on lately? Well, we’re getting our first glimpse at how well they’re paying off for Americans… According to CNBC, the U.S. trade deficit with China (meaning how much more of our money goes overseas to them than what comes to us) dropped a whopping 28% in February.

Exports to China rose $1.6 billion and imports from China fell $1.5 billion. That basically means that China bought more from us and we bought less from them. This is exactly what the doctor ordered for tackling that $30 billion trade deficit with China once and for all.

What will it take to fix our deficit for good?

If we want to stop losing money to our global trade partners, we have to continue exporting more than we import. It’s simple math. If you give away five apples and only get two, you’ll always be three fruits in the negative. That’s how trade works. When we import more from countries than we export to them, our trade deficit continues to grow and that puts pressure on companies, jobs, and worker’s wages.

Chipping away at our trade deficit takes time, but, thanks to our tough stance on trade and fighting for a level playing field, that’s exactly what’s happening. Since last year, U.S. exports rose 2.7 percent while imports increased just 0.5 percent. If we can continue that growth in exports over imports, the $49.4 billion deficit with our global trading partners will only get lower and lower.

Why should you care about a shrinking trade deficit?

As Time Magazine’s bold headline reads, the shrinking trade deficit “signals good things about the U.S. economy.” What you need to know about trade and how it impacts the overall economy is that trade is directly related to GDP, or gross-domestic-product. If the U.S. has a smaller trade deficit, it will have a higher GDP. When GDP is higher, economists are more confident, the Fed is more confident, and that leads companies and consumers to be more confident. Let’s call it the cycle of confidence.

Not to mention, China holds over $1 trillion in U.S. debt. As China buys more American products, not only does our trade deficit improve but our ability to pay our budget deficit (without help from China’s government) improves as well.

And the good news keeps coming. The fact that more people want our homegrown U.S. goods “should in turn give businesses the confidence to invest and create new jobs,” according to the Brookings Institute.

A shrinking trade deficit means:

  • More jobs for Americans now
  • More jobs for Americans in the future
  • Less national debt
  • Increased national security
  • Better opportunities for Wisconsin farmers

More opportunity in Wisconsin

Wisconsin exports increased 1.8 percent between 2017 and 2018 — representing nearly 1.4 percent of all U.S. exports — and more exports directly impacts the quantity and quality of jobs available in the state.

Take the U.S.-Canada trade agreement for example, which stands to benefit dairy farmers in Wisconsin. Thanks to a renegotiated agreement, Canada will “allow American farmers to export about $560 million worth of dairy products” — or about 3.5 percent of Canada’s dairy market. Canada is also adding an export charge on its skim milk products and infant formula, and that will ease competition for U.S. producers to sell more overseas.

Between 1991 and 2011, 2 million U.S. jobs were lost because of a trade imbalance with China, and half of those jobs were in manufacturing. That’s a big deal for a state like Wisconsin, where manufacturing is such a big part of the state’s economy. You don’t need to be an economist to understand that the more jobs that stay in Wisconsin, and the higher those jobs pay, the better everyone in the state will be in the long run.

Those tough trade talks are working

Whether it’s opening up foreign markets for dairy farmers, or increasing our manufacturing exports to China, one thing that’s for certain is that our trade system is heading in the right direction. Our exports are rising significantly more than our imports, and that cycle should continue now that we’re hammering out new trade deals with our biggest trading partners: Mexica, Canada, and China.

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