Trump Administration Seeks To Artificially Inflate Trade Deficit To Justify New Deals

Proposed New Formula Would Increase Gap By $250 Billion, Mostly Affecting Mexico And Canada

The Trump administration is looking to artificially inflate the U.S. trade deficit so that it can justify stricter new deals. 

The administration’s new formula for calculating the trade deficit would increase it by roughly $250 billion per year, mostly affecting Mexico and Canada, according to The Wall Street Journal (subscription only). 

“A larger trade deficit could give the administration leverage to renegotiate deals such as NAFTA, which Trump has vowed to rework,” CNBC reports. 

The proposed formula would exclude re-exports — goods that are first imported into the U.S. and then exported unchanged to a third country. 

“Such an approach would inflate trade deficit numbers because it would typically count goods as imports when they come into the country but not count the same goods when they go back out,” according to the financial blog ZeroHedge. “Should the change be implemented, it would have a stark effect on data involving countries that have free trade deals with the U.S., and in some cases the new methodology would even change a trade surplus into a trade deficit.”