1 00:00:02,100 --> 00:00:04,633 AMNA NAWAZ: President Trump has made the trade deficit a central focus of his agenda. 2 00:00:04,633 --> 00:00:09,466 That's included a major escalation of tariffs and engaging in trade wars, especially with 3 00:00:09,466 --> 00:00:11,500 China. 4 00:00:11,500 --> 00:00:14,966 But the latest figures for the past year show the overall U.S. trade deficit keeps growing. 5 00:00:14,966 --> 00:00:19,966 In fact, it rose by 12 percent, compared to 2017, and the trade gap is now the widest 6 00:00:20,700 --> 00:00:23,033 it's been since 2008. 7 00:00:23,033 --> 00:00:27,066 David Wessel of the Brookings Institution is back with us to help unpack what's behind 8 00:00:27,066 --> 00:00:29,733 those numbers and the larger picture. 9 00:00:29,733 --> 00:00:31,266 David Wessel, welcome back to the "NewsHour." 10 00:00:31,266 --> 00:00:35,233 So, help us understand, how did this number get so high? 11 00:00:35,233 --> 00:00:37,300 What's contributing to it? 12 00:00:37,300 --> 00:00:39,300 DAVID WESSEL, Brookings Institution: Well, basically, President Trump's tariffs and the 13 00:00:39,300 --> 00:00:43,300 retaliatory tariffs by our trading partners didn't help. 14 00:00:43,300 --> 00:00:47,966 But the major story here is that our economy is stronger than some of the other economies 15 00:00:47,966 --> 00:00:50,000 of the world. 16 00:00:50,000 --> 00:00:54,100 Our demand for their stuff is growing faster than their demand for our stuff. 17 00:00:54,100 --> 00:00:58,966 And so the trade deficit, which is the difference between our imports and our exports, is widening. 18 00:00:58,966 --> 00:01:02,933 AMNA NAWAZ: So, the president has repeatedly talked about that gap and called it unfair, 19 00:01:02,933 --> 00:01:07,933 and he said he was going to use those tariffs you just mentioned to try to close the gap. 20 00:01:09,133 --> 00:01:11,166 We see it's gone the other way right now. 21 00:01:11,166 --> 00:01:13,766 But the studies we have seen so far have showed us a little bit of what the effect of those 22 00:01:13,766 --> 00:01:15,400 tariffs have been. 23 00:01:15,400 --> 00:01:16,400 What do we know about that? 24 00:01:16,400 --> 00:01:18,433 DAVID WESSEL: Right. 25 00:01:18,433 --> 00:01:21,233 Well, first of all, the president actually deserves some of the blame for this, because, 26 00:01:21,233 --> 00:01:26,233 when you cut taxes a lot, and you stir the U.S. economy, people buy more stuff. 27 00:01:28,233 --> 00:01:31,233 When our budget deficit gets bigger, that tends to widen the trade deficit. 28 00:01:31,233 --> 00:01:35,800 What the president sometimes talks about is that somehow China is paying these tariffs. 29 00:01:35,800 --> 00:01:40,100 But these recent studies to which you refer are trying to figure out, when you have these 30 00:01:40,100 --> 00:01:42,633 tariffs, who gets hurt? 31 00:01:42,633 --> 00:01:46,600 Is it the exporting country or the U.S. consumers and businesses who are buying the stuff? 32 00:01:48,600 --> 00:01:51,533 And their bottom line is, most of the burden is falling on us, the consumers and businesses 33 00:01:51,533 --> 00:01:55,033 of the United States, who are paying more for imported stuff because of the tariffs. 34 00:01:55,033 --> 00:01:58,733 AMNA NAWAZ: So, the burden is falling to us, but I'm also hearing you saying, because of 35 00:01:58,733 --> 00:02:02,733 this trade deficit and the numbers, it means we're consuming more than we produce. 36 00:02:02,733 --> 00:02:06,766 That suggests we have the cash and the ability to be able to do so. 37 00:02:06,766 --> 00:02:11,600 So, what does the trade deficit say about the overall health or strength of our economy? 38 00:02:11,600 --> 00:02:16,600 DAVID WESSEL: Well, sometimes, I think the trade deficit is overemphasized as a measure 39 00:02:17,333 --> 00:02:19,300 of the economy's health. 40 00:02:19,300 --> 00:02:22,300 It does mean, as you say, that we're consuming more than we produce. 41 00:02:22,300 --> 00:02:24,366 We're lucky enough to be able to do that. 42 00:02:24,366 --> 00:02:27,533 It also means that we invest more than we save. 43 00:02:27,533 --> 00:02:31,200 We're borrowing a lot of the money to buy these imports. 44 00:02:31,200 --> 00:02:35,833 But I think that the bottom line is that there are good ways and bad ways to get rid of a 45 00:02:35,833 --> 00:02:37,100 trade deficit. 46 00:02:37,100 --> 00:02:39,100 A bad way would be, we could have a recession. 47 00:02:39,100 --> 00:02:41,166 Then we can't afford to buy things. 48 00:02:41,166 --> 00:02:45,233 A good way to get rid of the trade deficit would be for us to save a little more or for 49 00:02:45,233 --> 00:02:49,133 us to get a little more competitive, make better things, work more efficiently. 50 00:02:49,133 --> 00:02:52,066 So, it's a signal that we have work to do on that front. 51 00:02:52,066 --> 00:02:56,100 AMNA NAWAZ: So, David, does this number say to you that there's any reason for us to be 52 00:02:56,100 --> 00:02:57,800 concerned? 53 00:02:57,800 --> 00:02:59,500 Or, if it continues to grow, could there be reason for concern? 54 00:02:59,500 --> 00:03:01,233 DAVID WESSEL: Yes. 55 00:03:01,233 --> 00:03:03,633 If it continued to grow, there would be reasoned concern. 56 00:03:03,633 --> 00:03:05,900 At these levels, it's not so bad. 57 00:03:05,900 --> 00:03:09,766 The problem is, it's probably going to get worse, because the rest of the world is not 58 00:03:09,766 --> 00:03:11,200 doing very well. 59 00:03:11,200 --> 00:03:13,266 China is slowing. 60 00:03:13,266 --> 00:03:16,366 China's actually importing less from all its trading partners, not just from us. 61 00:03:16,366 --> 00:03:21,033 And, today, for instance, the European Central Bank marked down its forecast for growth in 62 00:03:21,033 --> 00:03:22,566 Europe. 63 00:03:22,566 --> 00:03:23,933 That means they're going to be buying less stuff for us. 64 00:03:23,933 --> 00:03:25,966 So the trade deficit is going to get bigger. 65 00:03:25,966 --> 00:03:27,933 At some point, it could get dangerously large. 66 00:03:27,933 --> 00:03:29,033 But we're not there yet. 67 00:03:29,033 --> 00:03:30,266 AMNA NAWAZ: We're not there yet. 68 00:03:30,266 --> 00:03:32,166 We will continue to track it then. 69 00:03:32,166 --> 00:03:34,333 David Wessel of the Brookings Institution, thanks for your time, as always. 70 00:03:34,333 --> 00:03:35,333 DAVID WESSEL: You're welcome.