With the recent announcement of the so-called Phase 1 'Trade Deal' with China, the U.S. President has claimed that his Administration is winning the trade war with Beijing and that the U.S. economy is gaining from the rounds and rounds of tariffs and trade restrictions imposed on its bilateral trade with China.
Here is a tangible set of metrics showing the cost indices for U.S. trade (exports and imports) over the period of President Trump's tenure, compared to the track record of his predecessors:
In basic terms, the adverse movements in imports prices have been more than offset by the positive movements in export prices since the start of the Trump presidency. However, two caveats to this warrant more cautious analysis of this data:
- Mr. Trump's presidency has not been associated with statistically distinct imports prices performance, compared to the Obama administration (see averages and levels for import price indices in the above), while Mr. Trump's tenure has been associated with markedly lower export prices for the U.S. exporters (the blue line above); and
- The gap between export prices and import prices (positive and larger gap signals higher relative prices of exports compared to imports - a net positive for the external balance), under Trump administration remains well below previous administration's track record (see chart next).
There is preciously little if any evidence in the trade prices indices to suggest that the Trump administration is either winning any trade wars or improving U.S. exporters' environment. If anything, there is more evidence that the U.S. economy is facing similar supportive tailwinds from global imports prices deflation to those experienced by its counterparts, and these are broadly in line with the tailwinds experienced by China: