Will Trump Oppose This Deal?

Toyota and Mazda announced today they are investing $1.6 billion in a new auto plant in Alabama.  The construction will bring some 4,000 jobs to the region.

However, since this plant is a foreign entity, the $1.6 billion will be counted toward the trade deficit.  In other words, the trade deficit will expand by $1.6 billion with this project.  This, of course, puts Trump and the mercantilists in his administration in a bind: they claim manufacturing is good and the trade deficit is bad, but here we see a clear case where the trade deficit is creating jobs (as it does anyway).

So, will Mr. Trump bite the bullet and argue this plant construction is “the worst trade deal in history” or will he admit his economic schemes are intellectually inconsistent?  Only time will tell…

12 thoughts on “Will Trump Oppose This Deal?

      • I don’t think most knowledge or facts are important or useful to Trump. He just needs whatever it takes to sell Trump to the people and anything else is simply bloat to his brain. He’s very, very good at what he does. Believe me.

        Liked by 1 person

        • Ron, I agree with you on a lot of things, so there’s no reason to comment on all of that. We used to call the ten people in the room at meetings who nodded their heads when someone said something Bobbleheads (or suck ups as the case may have been).

          Generally, if I don’t say something, I agree or at least can support what is said (or failing either of those, at least not work against what’s said)

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  1. Please forgive me but I have some questions. Be advised I am neither an intellectual nor an academic, just a simple working man from Oklahoma. Please realize I am not debating you, I simply don’t understand what you’re saying. How does an investment by foreign companies in the US count toward the deficit? Aren’t they adding money into to US, money that is currently housed outside the country? Why would taking money out of a foreign country and putting it into the US cause a deficit for the US?

    Secondly, and unrelated to the first question, this plant is to add 4000 jobs. Are those jobs all permanent car manufacturing jobs, or is a portion of them temporary construction jobs in building the plant?

    I’ll thank you for your reply in advance.

    Liked by 1 person

    • Good questions!

      To your first: the easiest way to think about it is any commodity, including money, that flows into a country from abroad is considered an “import” and any commodity, including money, that flows out of a country is considered an “export” (it’s far more complicated than that, but I doubt you’re looking for an in-depth lecture on national accounting 🙂 ).

      So, when a foreign entity purchases assets (in this case), it increases “imports” and thus, all else held equal, the trade deficit.

      This explanation is really to help you wrap your head around the concept in an abstract manner. If you’d like a more in-depth but still accessible explanation, check out this blog post by Don Boudreaux: http://cafehayek.com/2017/03/42394.html

      Regarding your second question: I don’t know. It’s not obvious from the article.

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    • Dan, you might also find this explanation helpful:

      https://www.creators.com/read/walter-williams/05/17/trade-ignorance-and-demagoguery

      You asked: ” Why would taking money out of a foreign country and putting it into the US cause a deficit for the US?”

      The answer is that, as you say, it caused a surplus of money in the US but it also causes a “deficit” in goods and services. To balance, that money must be exchanged for goods and services (or assets) outside the US. We call that a trade deficit, but it really isn’t a “deficit” at all.

      Some people seem concerned that these exchanges take place across international borders, But there is no more reason for concern than there is for exchanges between US states, or cities, or for that matter between you and your grocer, from whom you probably buy a great deal more than he buys from you.

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