How Trump could make the trade deficit look worse

Mexico seeks 'win-win' trade deal

President Trump’s team may use a fresh maneuver to try to get better trade deals: Make the trade deficit look worse than the idea is actually.

The trade deficit, which was $502 billion last year, is actually one of Trump’s favorite punching bags.

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The trade deficit is actually the difference between the value of goods in addition to also also services shipped into in addition to also also out of the U.S.

Trump’s administration is actually considering a change to the way the idea calculates the trade deficit, according to a Wall Street Journal report. the idea may remove a key component of trade which would certainly make the U.S. deficit appear bigger. A larger trade deficit could be used as a bargaining chip with Mexico during upcoming trade talks.

The report has sparked a debate among trade advocates.

One former U.S. trade official says the change is actually a misleading idea which won’t get better trade deals.

Related: Mexico is actually already pivoting away by the U.S.

“They want to change the methodology in order to make trade deficits look larger than they are. One, which’s cooking the books. Two, the idea’s going to make life difficult with the rest of the planet because ultimately all the numbers have to add up. in addition to also also three, the idea could have unintended consequences of driving a lot of distribution in addition to also also logistics jobs out of the U.S.” says a former U.S. trade official who asked not to be identified.

The crux of the issue revolves around something called “re-exports.” Trump’s trade team is actually reportedly mulling whether to stop counting them. By removing re-exports, the idea would certainly make the trade deficit bigger than the idea is actually today.

“the idea’s duplicitous,” says Edward Alden, a senior fellow at the Council on Foreign Relations. “The idea of changing the methodology just with respect to re-exports is actually just deliberately dishonest.”

Re-exports are goods which are grown, produced or manufactured outside the U.S., then shipped into America, then shipped to a third country without undergoing a significant change, according to the Census Bureau.

Related: Mexican farmer’s daughter: NAFTA destroyed us

Counting re-exports is actually consistent with the guidelines of the United Nations in addition to also also International Monetary Fund.

Here’s an example. Let’s say Walmart ships in $100 million of T-shirts by China to its warehouse in Arkansas. Half of those shirts are for American stores, the different half are for Walmart stores in Mexico in addition to also also Canada.

Under current rules, which would certainly be counted as a $100 million import, a $50 million re-export in addition to also also, overall, a $50 million deficit.

Under potential no re-export rules, which would certainly be counted as a $100 million import, no export at all, in addition to also also a $100 million deficit.

Some advocate for removing re-exports by the calculation because they say the products originally came by another country, had little or no change within the U.S., in addition to also also then went to another country.

Critics say re-exports support no U.S. jobs.

Related: What is actually NAFTA in addition to also also why Trump hates the idea

“The current method for reporting bilateral trade flows significantly distorts trade balances to dramatically in addition to also also deceptively reduce U.S. trade deficits,” says Lori Wallach, director of Public Citizen’s Global Trade Watch, a nonprofit in Washington.

However, proponents of the current rules say re-exports support warehouse jobs in America. which’s because, for example, when the t-shirts made in China come to the U.S., they are housed at a facility before being shipped to another country. which U.S. warehouse requires workers.

As re-exports have grown in recent years, so have warehouse jobs. In 2012, re-exports made up 12% of total U.S. exports. which year there were 668,000 warehouse jobs. Today, re-exports make up 15% of all U.S. exports in addition to also also there are 957,000 total warehouse jobs.

White House press secretary Sean Spicer, trade adviser Peter Navarro in addition to also also the office of the U.S. Trade Representative didn’t respond to a request for comment.

sy88pgw (fresh York) First published February 21, 2017: 5:30 PM ET

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How Trump could make the trade deficit look worse

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