The Trump administration is considering changing the way it calculates U.S. trade deficits, a shift that would make the country’s trade gap appear larger than it had in past years, according to people involved in the discussions.
The leading idea under consideration would exclude from U.S. exports any goods first imported into the country, such as cars, and then transferred to a third country like Canada or Mexico unchanged, these people told The Wall Street Journal.
Economists say that approach would inflate trade deficit numbers because it would typically count goods as imports when they come into the country but not count the same goods when they go back out, known as re-exports.
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Several economists interviewed by the Journal were uneasy with fully excluding re-exports from exports but not imports.
“As a statistician, you generally want symmetry,” said Steve Landefeld, former BEA director. “If you’re going to begin to exclude re-exports from the U.S. export figures, you probably for reasons of symmetry” would want to adjust import figures as well.
If that's really what they have in mind, I'm not sure how this differs from, say, multiplying the deficit by 2, or inserting a minus sign in front of a bilateral trade surplus and calling it a deficit. But putting that aside, how is it possible that coming up with a higher trade deficit number could convince anyone to take a different approach to trade policy? The article says this:
A larger trade deficit would give the Trump administration ammunition in arguing that trade deals need to be renegotiated, and might help boost political support for imposing tariffs.
OK, but the employment numbers won't change. The GDP growth numbers won't change. Why would pointing to a different trade deficit number cause any change in policy? Is there really anyone in Congress, or anywhere else, who would buy this as an argument for imposing tariffs? As for the renegotiation, I thought that was coming regardless of any trade deficit numbers. The question there is simply what parts of trade deals the Trump administration wants renegotiated. So far we haven't heard much on that one.
