Former Reagan economist Artraffer said on Monday in Fox Business that the US should not only tolerate it, but to embrace a significant trade deficit.
US stocks plummeted Thursday. President Donald Trump announced new baseline 10% tariffs and increased tariffs in countries with trade disruptions, leading to the worst session of the Dow since June 2020.
“The trade deficit is not a problem. People are pushing their businesses back to the US and loading machines into Mexico to drive them across the border, and now they employ Americans rather than Mexicans,” Laffer told host Larry Kudrow. “If we do that because we have good policies, it’s called the Mexican trade surplus and the US trade deficit.”
Raffer said the trade deficit indicates an inflow of capital into the country, but he considers it clearly useful.
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“The trade deficit is a surplus of capital. That’s when you bring the capital home. So anything you say is bad is completely wrong,” Laffer said. “It’s a surplus of capital, so the US needs a trade deficit. When Reagan’s tax cut came into effect on January 1, 1983, the US became a huge trade deficit as its economy was incredibly booming. Everyone was trying to invest in the US.”
The economists also praised Trump’s economic policies and suggested recreating the success of the Reagan administration. (Related: “The Real Villain”: Steve Moore will identify who created the market tank on Friday.
“What do you want? Do you have capital lined up at your borders trying to enter or leave your country? Of course you want them to come to the country. That’s what happened in Reagan,” added Raffer. “And by the way, that’s what happens with Trump with incredible policies. What he did with all the other policies is spectacular. I think he was the best single president in economics in his first term.”
Raffer said a robust trade deficit is not a sign of economic weakness, but a strategic advantage that indicates a thriving economy.
“If he does this right this time, he will be the best president in economics. But we need a big trade deficit, a big surplus of capital. “That’s what we need.”
Since Trump returned to the White House, the US has been actively engaged in strategic trade negotiations with several countries, including Mexico, China and Canada. During his first term, Trump implemented a series of trade measures targeting China and launched a trade dialogue between the US and China.
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