USA trade agreements

USA may make trade agreements with some countries. If countries retaliate, both sides will get harmed. It is very reasonable to assume that a trade agreement will decrease USA's deficit, otherwise USA will not accept it. In Appendix 22 we can make some interesting calculations. We will give one more reason why it is very important for USA to make a deal with China. It is more important to make this deal than any other deal.

We examined Ireland in a previous article. Ireland's trade surplus with USA is almost 15% of GDP as it can be seen in Column 4 of Table B. If there is an agreement, a critical issue will be the RATE of SURPLUS REDUCTION (deficit for USA). If it will decrease to almost zero in fifteen years, the drop in growth rates will be 15/15=1%. In seven and a half years it will be 2%, in five years 3% and in three years 5%.

If countries negotiate a trade surplus reduction, it is to their benefit to have the rate as low as possible. China has by far the largest trade deficit. EU is not a country but a failed experiment that must end the soonest possible. We will deal with this gruesomeness in next article. We will examine only countries. If USA eliminates deficit with China, it will gain 0,97% of GDP as it can be seen in column 3 of Table C.

Suppose that China agrees on a three year reduction plan. In three years it will be close to zero. That will cause a 0,5% drop in China's growth rates for three years. For USA it will be a 0,97/3 = 0,32% gain in growth rates for three years. Next largest deficit is with Mexico. It will be hard for Mexico to eliminate it in three years. The drop in growth rates would be 9,46/3 = 3,15%.

Suppose that a ten year reduction is agreed. For Mexico, the drop in growth rates will be almost 1% for ten years. For USA the gain will be 0,06% for ten years. Let's say that Ireland agrees on the same rate of trade surplus reduction, 1%. USA will have a 0,02% gain in growth rates for fifteen years. If Germany agrees on a three year surplus elimination, growth rates will drop 0,57% while USA will gain 0,09% for three years.

USA has to gain more and sooner, if it makes a surplus reduction deal with China. We stated that China's surplus with USA is in accordance with the world, total surplus is 1,42%. In the world, USA is included. With the rest of the world, China has 1,51 - 1,42 = 0,09% deficit. This is average and probably varies considerably with each country. Anyone interested should look into China's trade balance.

If China reduces deficit with USA to 0,09%, overall it will have zero surplus and trading with all the countries will be fair. If Germany eliminates deficit with USA it will have 5,9 - 1,72 = 4,18% surplus. If Ireland eliminates surplus with USA, it will have 14,77 - 9,90 = 4,18 deficit. So it will have to correct deficits with other countries. For Mexico it will be - 0,32 - 9,46 = - 9,78% (deficit) and for Japan 3,58% - 1,56 = 2,02% (surplus).

We suggested that instead of tariffs on counties, these should be on products. If it happens, tariffs should be set accordingly to desired trade surplus reduction rates. This is not an easy job at all but countries have teams of experts that can accomplish that. Unlike with quotas, the effect of tariffs on imports can't be estimated precisely. Quotas is another way to correct deficit.

Tariffs are not the only tool to protect the economy. There are other ways as well, quotas, subsidies, exchange rate control, campaign. Quotas set a limit on the quantity of imports. Subsidies lower the prices of domestic producers. When the currency is devalued, imports become more expensive and exports less expensive. A campaign aims to convince consumers to buy domestic products.

With subsidies, government must find the funds. It can either increase taxes or cut expenditures in other areas. It is the opposite of tariffs. Tariffs increase government revenues and these can be used to lower taxes or increase expenditures in other areas. If the currency is devalued, domestically produced goods become more competitive inside the country and abroad. Imports decrease and exports increase.

Quotas have a similar effect with tariffs. Both restrict imports. With quotas it can be more precise because with tariffs it is done indirectly and it is hard to estimate with accuracy how much imports will decrease. Companies may absorb part of tariffs. Even if the price increase is known, it is hard to predict precisely how consumers will respond to that.

The predicted effect of certain tariffs may be close or far from the actual effect. Because the effect of tariffs can't be precisely estimated, there should be extreme caution in any agreements made. There should not be any long term agreements. Alternatively, there should be an option to revise the agreement annually. The focus should be on how deficit will be reduced, not how much tariffs will be. 

USA's Vice President Vance said that a UK - USA Agreement is possible. Some media reported that it will be free trade agreement. Both sides should be very cautious because free trade is rarely fair trade. Free trade is not a win - win situation as NWO vicious cabal claims but a win - lose situation. One side benefits and the other side is harmed.

In a previous article we stated that USA has a trade surplus with UK. This was correct but it was not the most recent data. Currently it is deficit. We do the best we can searching in the internet. We need to point out that there may be some discrepancies in the numbers because they are from different sources and in some cases from previous years. Nevertheless, they give a very good general idea and serve very well the purposes of this web site. Those that will be involved in any negotiations or agreements should find more accurate numbers.