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 A few recent headlines have passed without much
attention. The first story is our national debt has reached $30 trillion, while
the second is the trade deficit for 2021 hit a record $859.1 billion. Both
stories were virtually ignored because the American people have just become numb
to the topics, though they may be missing some wider ramifications, especially
when it comes to trade.
Of the two issues, the trade deficit receives less attention than the national
debt; many policymakers on both sides of the philosophical divide seemingly
regard it as meaningless. The trade deficit is simply the amount to which
imports into the United States exceed what we export in a given year. Last
year’s $859 billion trade deficit is a 27% increase over the previous year. One
factor that contributed to that increase was inflation as consumers purchased
more goods at inflation-fueled prices. Some of the leading imported goods
included computers, cell phones, toys, furniture, autos, and medical supplies.
Since 2001, our nation “has rung up over $12 trillion dollars in accumulated
global deficits.”
As part of our total trade deficit, the imbalance with China alone was $355
billion, which marked a full decade of that annual deficit hitting over $300
billion. In fact, China’s exports to the United States have risen 31% since
2018. The United States also ran a considerable trade deficit with the European
Union, among other trading partners.
There is an endless amount of data to further illustrate trends in American
trade. Perhaps our leaders should pause for a moment and examine the impact of
those trends beyond purely a dollars and cents calculation. Are there other
outcomes that are more difficult to quantify? Have we become overly reliant on
foreign trading partners and, if so, what does it mean for the supply chain or
even national security?
Ambassador Robert Lighthizer, who served as President Donald Trump’s United
States Trade Representative, summarizes the balance our leaders have attempted
to strike over the years as they worked toward what is best for America,
“Conservative statesman from Alexander Hamilton to Ronald Reagan sometimes
supported protectionism and at other times they leaned toward lowering barriers.
But they always understood that trade policy was merely a tool for building a
strong and independent country with a prosperous middle class.”
If America viewed trade policy as a tool and not a goal in and of itself, we
would want to consider how dependent we are on other nations for necessities,
including potentially hostile adversaries such as China. This even includes
materials related to our national security and defense. Currently, a shortage of
semiconductors exists. “Why are semiconductors so important? Because computer
chips are the ‘brains’ of not just computers, cars, and medical devices, but
also the weapons systems that support America’s military. Being so dependent on
imported computer chips leaves America’s national security vulnerable to the
whims of the global market,” wrote Michael Stumo, CEO of the Coalition for a
Prosperous America.
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“What’s worrying is the degree to which China dominates the global supply of
these crucial resources. For example, China controls 70% of the world’s lithium
supplies, 80% of rare earth metals, and roughly 70% of the world’s graphite.
These materials are irreplaceable for producing everything from electric vehicle
batteries to solar panels and semiconductors,” argued Stumo.
As Ambassador Lighthizer alluded to, this is hardly a new dynamic. Even our
Founding Fathers understood the danger of relying on a foreign power for
necessities. Before he was the inspiration for an incredibly popular musical,
Alexander Hamilton served as General George Washington’s aide-de-camp and led a
charge at the siege of Yorktown, which resulted in the British defeat in the
Revolutionary War. Hamilton would later become Secretary of the Treasury in
President Washington’s administration and he is credited as the “father of
American capitalism.” During the Revolutionary War, Hamilton saw firsthand the
various hardships the Continental Army endured. One very significant challenge
was a lack of supplies and our dependence upon France for resources.
In 1791, Hamilton issued his Report on Manufacturers and a prime point he made
was the importance of national self-sufficiency. As Hamilton argued:
In his first message to Congress, President Washington offered a similar
argument when he stated the nation should “promote such manufactories as tend to
render them independent of others for essential, particularly military,
supplies.”
Seeking out foreign trading partners has undoubtedly helped consumers by making
many goods more affordable. It has benefited businesses with lower input costs,
a lighter regulatory burden in certain countries, and additional markets in
which to sell their products. Living in Iowa, we must acknowledge all the
benefits our agriculture producers, for instance, have reaped as they have
exported food around the globe.
Nonetheless, as America’s trading strategy is further refined, is there a
broader view our policymakers could be taking? How much should the threats
Hamilton and Washington warned about over two centuries ago factor into the next
rounds of trade agreements? This country’s leaders will have plenty to consider
beyond the sum total of economic activity.
John Hendrickson is policy director for Iowans for Tax Relief
Foundation
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