Why the US does not really have a deficit with the EU

Discussion in 'The War Room' started by JDragon, Jun 13, 2018.

  1. JDragon

    JDragon The Commissioner

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    Donald Trump is claiming that the European Union is living at the expense of the United States. He has claimed that the export surplus of the EU towards the US is at 153 billion dollars. In fact, that's only part of the story and not true if you consider the whole picture. If you do not only include the import and export of goods, but also other monetary flows between the US and Europe.

    If you include just the exchange of services rendered by, e.g., American internet corporations, banks and tourism companies for their European clients, the picture changes dramatically. The United States had a surplus of 51 billion dollars here in 2017, which reduces the overall US trade deficit with Europe to about 100 billion dollars.

    If you include the so-called primary and secondary income, the balance changes definitely. The primary income is mainly the profits transferred by the European subsidiaries of companies like Apple, Amazon, Facebook, and Google to their mother companies. Here, the US had a surplus of 106 billion dollars in 2017, showing that obviously American investments in Europe where a lot more lucrative than European investments in the US.

    The secondary income is e.g. the money that Americans living in the US are transferring to their relatives. The US had a surplus of 10 billion dollars here in 2017.

    In total therefore, the US actually has a surplus of about 14 billion dollars in dealing with the EU, showing that the global division of labour is actually working quite fine. It's just that the US is well ahead in terms of finance, IT and B2B services, whereas the EU is ahead with regard to building cars, machines and other industrial products.

    Source of the report these figures are based on: http://www.econpol.eu/publications/policy_report_7

    The Netherlands, the UK, and likely Ireland and Malta are the main sources of the surplus of the US in dealing with the EU - those countries considered as tax havens, which is why they are often chosen for EU headquarters by US corporations. This has political implications as these countries obviously have different interests than the rest of the EU. Trump is likely to play divide and conquer down the road.

    The EU would certainly need to target the internet giants in order to retaliate if Trump gets serious about taking down the European industry.
     
  2. Headkicktoleg

    Headkicktoleg Gold Belt

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    I believe Trump is giving a tax holiday for US companies to re-patriot they surplus European money. Cisco is going to bring $67 billion from EU to US and Apple $250 billion.
     
  3. JDragon

    JDragon The Commissioner

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    Yeah, that will be shifting the balance, which is already in favor of the US, more towards the US. It's obviously fair game to do that, but it's not very honest to claim that the US is suffering under European exports.
     
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  4. Headkicktoleg

    Headkicktoleg Gold Belt

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    no of course not and I have never heard anyone say they don't want European imports
     
  5. Rod1

    Rod1 Yellow Card Yellow Card

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    You never heard of Trump?
     
  6. snakedafunky

    snakedafunky Red Belt

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    Those internet giants are also quickly becoming the highest campaign contributors in the US.
    If you would target them, they certainly would have the sway to change something.

    In general its easier for the EU to influence US politics via tariffs than the other way around.
    If I were the EU I would target industries that are in swing states to make sure they lean against Trump (or whoever is in favor of tariffs).
     
  7. Renard

    Renard Brown Belt

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    Almost all of the US's deficit is with China. President Xi found the right formula when dealing with Trump, China is rife with corruption so I assume he has practise lol. He offered a deal that would personally enrich Trump and his daughter. It's a worthless concession compared to $365B in trade deficit, but it flatters Trump's ego so that did the trick. It's really not about objective outcomes, it's all about making sure Trump's fragile ego feels about himself, symbolic concessions work. You see what happens when you don't do anything to feed Trump's ego e.g. Trudeau. Sadly the "clean" leaders don't really have these corruption options on the table.
     
  8. PolishHeadlock

    PolishHeadlock Putin Belt Platinum Member

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    If I followed Trump's logic I would have to stop shopping at Target because I have a Trade Deficit with them.
     
  9. Black Helicopters

    Black Helicopters Double Yellow Card Double Yellow Card Yellow Card Banned

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    It goes to show that Republican voters (and Donald Trump) never actually understood what the Republican Party stood for, and only ever endorsed it because that’s what their side did.
     
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  10. Rod1

    Rod1 Yellow Card Yellow Card

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    It doesnt matters, for Trump its a political stunt and everything he does is all for political points. People like to claim that the US is some victim of the very same world economic order they created and of which they profit massively.
     
  11. V-2

    V-2 [ [ AT/GC ] ] Double Yellow Card Yellow Card Banned

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    Respectfully, this doesn't hold or level with reality.



    Also, considering semiconductors play the single most important role in attaining tech superpower status, I'd say he's been anything but friendly to China. Objectivity. This has nothing to do with domestic partisan politics, it's an utterly different realm entirely and so long as people can only view it through that lens they stay blind to what is going on.

    A comprehensive example.

    Bloomberg: Why China Can't Make Semiconductors

    ^^ It doesn't hurt that virtually all of R&D and sizeable majority of the front-end fabrication is and has always been done in the United States, or that semiconductors are among the most complex technological devices that have ever been produced. It's difficult enough to mirror the manufacturing techniques, nevermind the actual products. They're having a hell of a time attempting to steal trade secrets and reverse engineer. The US holds 51% market share followed by South Korea (17%), Japan (12%), European Union (8%) and Taiwan (7%).

    https://www.bloomberg.com/amp/news/...a-backed-bid-for-chipmaker-over-security-risk

    President Donald Trump blocked a Chinese-backed investor from buying Lattice Semiconductor Corp., casting a cloud over Chinese deals seeking U.S. security clearance and spurring a call for fairness from Beijing.

    It was just the fourth time in a quarter century that a U.S. president has ordered a foreign takeover of an American firm stopped on national-security concerns. Trump acted on the recommendation of a multi-agency panel, the White House and the Treasury Department said Wednesday. The spurned buyer, Canyon Bridge Capital Partners LLC, is a private-equity firm backed by a Chinese state-owned asset manager.

    The Trump administration has maintained a tough stance against Chinese takeovers of American businesses even as it seeks China’s help to resolve the North Korean nuclear crisis. Other deals under review include MoneyGram International Inc.’s proposed sale to Ant Financial, the financial-services company controlled by Chinese billionaire Jack Ma. The government is also examining an agreement by Chinese conglomerate HNA Group Co. to buy a stake in SkyBridge Capital LLC.

    https://www.reuters.com/article/us-...rras-sale-to-chinese-state-fund-idUSKCN1G703H

    U.S. semiconductor testing company Xcerra Corp (XCRA.O) said on Thursday a U.S. national security panel had blocked its $580-million sale to a Chinese state-backed semiconductor investment fund, the latest such deal to be thwarted.

    The acquisition of Xcerra by Hubei Xinyan was seen as a key test of the ability of Chinese firms to acquire U.S. technology assets, because the company does not make chips itself, but provides testing equipment used in making semiconductors.

    The deal’s demise comes as the Committee on Foreign Investment in the United States (CFIUS) has become increasingly skeptical of Chinese acquisitions of U.S. companies following the inauguration of U.S. President Donald Trump a year ago.

    https://www.bloomberg.com/amp/news/...age-with-broadcom-block-u-s-tech-not-for-sale

    With his swift rejection of Broadcom Ltd.’s hostile takeover of Qualcomm Inc., President Donald Trump sent a clear signal to overseas investors: Any deal that could give China an edge in critical technology will be swatted down in the name of national security.

    Although Broadcom is based in Singapore, China loomed large over the U.S. government’s fears about a foreign takeover of chipmaker Qualcomm. That’s because Qualcomm is locked in a head-to-head race with China’s Huawei Technologies Co. over which company will dominate the development of next-generation wireless technology.

    "This decision hangs a huge ‘not-for-sale’ sign on just about every American semiconductor firm," said Scott Kennedy, who studies China’s economic policy at the Center for Strategic & International Studies in Washington. "A Chinese entity doesn’t need to be anywhere near a transaction now in semiconductors for the deal to be nixed."

    [​IMG]

    Why all the fuss?

    [​IMG]
    [​IMG]
     
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  12. V-2

    V-2 [ [ AT/GC ] ] Double Yellow Card Yellow Card Banned

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    And far more suddenly seem desperate for the US to uphold it.
     
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  13. Rod1

    Rod1 Yellow Card Yellow Card

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    Because it will affect everyone, US politicians simply dont give a fuck about any long term damage as long as it gets them immediate political points.

    The US is the bus driver taking everyone off a cliff, the fact that everyone is scared shitless isnt "proof" that they are leeching of the bus driver.
     
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  14. V-2

    V-2 [ [ AT/GC ] ] Double Yellow Card Yellow Card Banned

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    They'll all renegotiate before it flies off the cliff, we're about to find out how powerful the United States really is. On another note, you see this article from yesterday?

    [​IMG]

    How The US Plans To Replace China As The World's Largest Manufacturer

    The United States, the world's second largest manufacturer with a 2017 industrial output reaching a record of approximately $2.2 trillion, will reportedly apply Industry 4.0 technologies to replace China as the world's largest manufacturer. This is what leading research firm Industry 4.0 Market Research reveals in its new report.

    The report forecasts that the US Industry 4.0 market will grow at a CAGR of 12.9% during 2016-2023, in hopes of dominating the manufacturing race against China once again. China displaced the United States as the largest manufacturing country in 2010.

    In the US, every dollar earned in manufacturing reportedly contributes $1.4 to the economy and for every manufacturing job created, approximately 2 jobs are created in other fields. Therefore, the US considers growth of the manufacturing sector a major success for the economy and is ready to invest considerable budgets to achieve it. It is understood that any efforts to reinvent US manufacturing by leveraging Industry 4.0 technologies to create smart factories will have a substantial impact on US economic growth.

    Restoring manufacturing jobs to the United States struggling Rust Belt communities and corporate tax cuts were two of President Donald Trump's biggest campaign promises. It is expected that Trump's administration will follow Obama's Industry 4.0 policy (2011): the formation of the Advanced Manufacturing Partnership (AMP), a national effort bringing together industry and the federal government to invest in Industry 4.0 technologies.

    The Industry 4.0 transformation holds immense potential. Smart factories allow individual customer requirements to be met, so that even one-off items can be manufactured profitably. In Industry 4.0, dynamic business and engineering processes enable last-minute changes to production and deliver the ability to respond flexibly to disruptions and failures on behalf of suppliers. With more efficient and optimized production in manufacturing, the entire sector is likely to thrive and rise again as a frontrunner of the US economy.


    NOTE: The US 'Industrial Output' mentioned in the article doesn't take into account mining (oil and gas extraction) nor construction from what I can tell, which would actually bring the 2017 GDP output figure to around $3.65 trillion which is consistent with the CIA World Factbook.
     
  15. Rod1

    Rod1 Yellow Card Yellow Card

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    Negotiate... what exactly?

    The US doesnt seems to have any goal in mind.
     
  16. V-2

    V-2 [ [ AT/GC ] ] Double Yellow Card Yellow Card Banned

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    It depends on the countries involved and something you'd have to take up with the USTR Robert Lighthizer. However, people seem blissfully unaware new deals have already been negotiated with the likes of Argentina, Brazil and South Korea. In the instance of SK, they're slashing steel exports by 30% with a newly imposed quota as well as opening their automotive market.

    My guess is that it won't even get as far as a "trade war" because while the major players can front resistance, the secondary tariffs to any response will likely be twice as devastating as the first wave. When it comes down to it, the US possesses by far the largest consumer market in the world and is the least reliant on global exports of any major economy.

    It was definitely dumb to say we're running any kind of agricultural deficit. The US is the agricultural superpower of the world and largest exporter. It won't be long before that's also true of oil and gas compounded with a reinvograted, robust manufacturing sector and maintained global dominance over the two industries at the forefront of innovation, technology and national security.
     
  17. Rod1

    Rod1 Yellow Card Yellow Card

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    Whats the problem with Canada? Mexico? the EU?

    Again, with what purpose?

    You have made a great point about the US being able to take a bullet to the foot but just because you can, doesn't means you should.
     
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  18. V-2

    V-2 [ [ AT/GC ] ] Double Yellow Card Yellow Card Banned

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    The Trump Doctrine? Thomas Jefferson? I have no idea tbh, Rod. I'm not pro-Trump, I am pro-America and that is it. I don't give a fuck about all the rest of that and those aren't moves that are to my liking nor have my endorsement for really, a large number of reasons. It would be a potentially disastrous situation for Germany. I want China confronted in a very direct and hostile manner with the linking of a multitude of issues that previously haven't been. I actually think the EU could be an asset in that area because they share a lot of the same complaints and concerns.
     
  19. Madmick

    Madmick Scholar of Taghaza Staff Member Senior Moderator

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    You're already doing your best damn job to discriminate and bilk against American tech. It's not working. All the GDPR succeeded in doing with Facebook was in catalyzing them to come up with a creative solution to basically ship your users over to American shores:
    Facebook to put 1.5bn users out of reach of new EU GDPR privacy law

    And if we're gonna do the thing we where don't just talk about trade imbalances within the context of trade, but all profit/cost offsets and imbalances, then I want your NATO deficits factored in. I want your derivative IP-market with regard to pharmaceuticals and how basically you're all piggybacking off American consumer dollars:
    Why Do Drugs Cost Less in Canada?
    There's so many damn ways like this that you Europeans are being carried by Americans, and you take it all for granted. You're so damn ungrateful.

    Maybe you need Trump to remind you what a sweet deal you've had. I want to do business, but don't talk to me about my best interests like I would ever in a million years be stupid enough to believe that you'd put my interests before your own. We Americans have reached our tether with this attitude.
     
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