Opinion | Trump can’t have it all: low prices, booming stocks, balanced trade
Trump wants to close the trade deficit while promising cheap goods and high asset prices. The cost? Devastating inflation or a market crash
The absurdity of a 50-year mortgage aside, the cheques, to be funded by his tariffs, would be counterproductive to a goal Trump has held since the 1980s: balancing the trade deficit.
Alongside affordability and balanced trade, Trump has long held a third economic goal: a booming stock market. But these three goals are structurally at odds with one another. At most, the United States can expect to have two in the short to medium term.
Trump has his impossible trinity for now because of imbalances in the international trading system and financial flows. Simple macroeconomic accounting shows us why.
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IDIOT’S GUIDE TO TRUMP’S TARIFFS
Gross domestic product is the sum of a country’s consumption (including that of households and the state) and total savings; this also represents a country’s domestic production. A country’s domestic demand, meanwhile, is the sum of total consumption and investment. The difference between a country’s domestic demand and domestic production – a difference also known as the trade balance – is simply the difference between a country’s total savings and investment.