# Retaliatory tariffs

**URL:** <https://boards.straightdope.com/t/retaliatory-tariffs/1013322>\
**Category:** Politics & Elections\
**Tags:** trump\
**Created:** [January 24, 2025, 4:48am UTC](https://boards.straightdope.com/t/retaliatory-tariffs/1013322 "2025-01-24T04:48:41Z")\
**Posts on this page:** 1\
**Showing post:** 444

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**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\
**Post date:** [April 6, 2025, 6:32pm UTC](https://boards.straightdope.com/t/retaliatory-tariffs/1013322/444 "2025-04-06T18:32:52Z")

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> [@PhillyGuy](#):
>
> What the heck does that have to do with the United States federal budget deficit? Did the U.S. budget deficit increase, by the same amount as the U.S. trade deficit, because a poster here bought Brazilian orange juice this afternoon instead of Florida? I do not see the mechanism there.

To see the mechanism read this post:

> [@Surprises coming for voters for the Leopards-Eating-Faces Party](https://boards.straightdope.com/t/surprises-coming-for-voters-for-the-leopards-eating-faces-party/1010166/2469):
>
> Nice post. Here’s an additional twist. You might wonder why getting lots of goods from abroad in exchange for fewer goods that we send them (a trade deficit) wouldn’t be a fantastic bargain for the US. Especially when unemployment is low. You might even wonder how that is even possible - why would foreigner’s do such a thing? You might get confused once you reflect that for every dollar sold on the foreign exchange market, a dollar must be purchased. What is going on here? If we’re buying mor…

This is an accounting identity: the trade deficit is equal to the savings-investment gap. Here’s a primer:

> **[Debunking Myths about the Trade Deficit](https://taxfoundation.org/blog/trade-deficit-myths/)**
>
> Politicians often bemoan the trade deficit, but their disdain for this economic statistic is largely misplaced. The trade deficit reflects deeper choices about how we use our money, and reducing it may require lowering our standard of living.

This is tricky and requires some focus to grasp. It’s not quantum mechanics though.

Also, Coyne simplifies. Tariffs could improve the US trade balance by driving the economy into recession and thereby reducing consumption and increasing savings. Let’s look at the key formula:

Exports - Imports = National Savings - Investment

Yes, you could boost national savings by reducing the federal budget deficit. You could also boost it by enticing foreigners to buy our bonds. Because if we’re buying more goods from abroad than we’re selling (imports \> exports) we need to be _selling_ foreigners something more than we are buying. That something would be financial assets like stocks, bonds, and US real estate.

During the late 1990s and early aughts, China put their thumb on the scale by buying massive amounts of Fannie Mae bonds (and selling more goods to the rest of the world than China bought). While the West probably should have retaliated at the time, we didn’t. And that’s water under the bridge.

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