Adjunct Professor Matt Gold was interviewed about U.S.-Germany trade On SiriusXM Business Radio.
“I think that how world leaders are managing President Trump depends on what’s on their personal agenda. Frequently, we have world leaders who are trying to get concessions for their countries and it serves their interests often to flatter Trump, as we just saw the Saudi’s do, and other leaders. But, in the case of Angela Merkel, she’s facing national elections, and so she’s looking for something for her political future rather than a concession for her country. And, it’s in her interest to play to her constituencies’ emotions by standing up to Trump and taking him on directly. Of course, Trump gave her an open door for that with several of the things he did while he was in Europe on this recent trip, and so she took him on.… What she said is that we can’t look to the United States for leadership anymore. But, what she meant was we can’t look to the United States for leadership while Donald Trump is President of the United States.”
“We’re certainly not allowed to just slap a 35% tariffs on good coming from Germany. The fact is, first of all, we negotiate tariffs with the European Union not with Germany. Second of all, ordinary custom duties for the European Union are actually lower on average than ordinary customs duties for United States. Third of all, we’re not, under WTO rules, allowed to just impose new ordinary customs duties that are higher than what we’re bound to — have as our limits — at the WTO. And when it comes to the special custom duties like antidumping duties, or countervailing duties, or safeguards, we’re not allowed to impose those either, unless we have very specific economic circumstances in place, which we don’t have with these products from Germany.”
“Because of our trade deficits, more of our dollars go overseas than come back. And there are a limited number of ways we can bring those dollars back. The ideal way is to sell more American goods and services overseas. But, that’s controlled by how much foreigners demand our goods and services, and when you hit that limit, what do you do next? And there only are, really, three or four options. One is ignore the problem and there are too few dollars in the United States, and that’s recessionary. One is to print more dollars and that’s inflationary. One is to bring those dollars back by selling U.S. stock, which … means more foreigners own U.S. industry—which is less of a problem than you might think, but it’s still not ideal. Another is to borrow the money as we’ve been discussing, and then that’s great as long as you invest it wisely. But, if you don’t invest it wisely, then you’re just digging yourself into a whole.”
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