VoxTalks Economics S8 Ep2: What policymakers get wrong about US trade deficits
Jan 8, 2025
Maurice Obstfeld, a seasoned economist with two decades of research on global trade imbalances, dives deep into the intricacies of U.S. trade deficits. He questions popular narratives surrounding trade and job losses, particularly linked to China. The discussion highlights the real causes of these deficits amid the retreat from globalization, exploring the impact of technology on manufacturing. Obstfeld also critiques the proposed tariff solutions during the Trump administration, emphasizing their potential inflationary effects and broader economic consequences.
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Trade Deficit's Long Shadow
- The US trade deficit from the 2000s significantly influences current political and economic discussions.
- This period's events, particularly China's rise as an exporter, shape current trade policies and debates.
The China Narrative
- The narrative that China's actions caused the US trade deficit is prevalent on both the left and right.
- This view blames globalization for job losses and seeks to restore manufacturing through tariffs and industrial policy.
The Role of Technology
- Technological change, particularly increased productivity, significantly contributed to the decline in US manufacturing jobs.
- Manufacturing productivity flatlined around 2008, coinciding with a slower decline in manufacturing employment.