Trump's new trade policy

[stpioc]

This is a must read. Trump's trade picks are basically illiterate in economics.

“When net exports are negative,” Ross and Navarro write, “that is, when a country runs a trade deficit by importing more than it exports, this subtracts from growth.” They believe that, therefore, we can boost growth by curtailing imports

Donald Trump’s trade team has based their analysis on a remarkably silly mistake - Vox

They get this from an accounting identity: GDP = G + C + I + NX.

GDP = Gross Domestic Product
G = Government expenditures
C = Consumption
I = Investment
NX = Net Exports.

It's an accounting identity, not a causal relationship.

But has it occurred to them that using the same accounting identity, boosting G (government expenditures) would also boost growth? I don't think many of these right-wingers agree with that (to put it mildly). An example from the article:

Here’s a quick way to tell that something has gone wrong with the Ross/Navarro argument. Last year, the United States imported $180 billion worth of petroleum products — oil and such.

According to Ross and Navarro, if the United States made it illegal to import oil, thus wiping $180 billion off the trade deficit, our GDP would rise by $180 billion. With labor constituting 44 percent of GDP, that would mean about $80 billion worth of higher wages for American workers. So why doesn’t Congress take this simple, easy step to boost growth and create jobs?
Well, because it’s ridiculous.

What would actually happen is that gasoline would become much more expensive, consumers would need to cut back spending on non-gasoline items, businesses would face a higher cost structure, and the overall economy would slow down with inflation-adjusted incomes falling. 

Incredible stuff.