Source: Money and Banking Online    Published: 2025-04-20

By Bank Finance

“Jeffrey Sachs”, a world-class economist, reflects on the lesson that “Trump” never understood: Trade deficit ≠ being cheated When the trade deficit is not a win-lose game 

While China's 145% tariffs didn't make China a loser, and the stock market plunged $10 trillion before reversing $4 trillion, who benefits?

April 20, 2568 Jeffrey Sachs, world-renowned American economist and public policy analyst Speaking on stage at the Antalya Diplomacy Forum in Turkey, he addressed the global turmoil after US President Donald Trump took office and began issuing various policies, especially retaliatory tariffs that have affected countries around the world.

Jeffrey Sachs starts by giving a simple illustration of how Trump is trying to tell the world about the trade deficit: “If you use your own credit card to go shopping, you will end up with a huge credit card debt.” That means you are running a trade deficit with all those stores, and it would be strange if you blamed the store owners for selling you the goods. “You cheated me, you cheated me, you cheated me, I’m running a trade deficit.” 

Jeffrey Sachs said that the US president's level of understanding is just that.

Explaining that the trade deficit does not reflect trade policy, but rather “Spending vs. Production” หรือ “Income” (Spending relative to production or earnings) This is called economic identity, which I teach on the second day of my international financial economics class, but Trump never made it to the second day.

When Trump said that “You are running a trade deficit. Look, they are cheating me.” In reality, what happened was that the United States spent more than it earned. You can see this by looking at the national income graph. When you add consumption, investment, and government spending together, and then subtract the gross national product (GNP), you get… the result, which is not just an estimate, but an exact match: a current account deficit, which is a comprehensive measure of how much a country spends on goods and services relative to what it sells.

So that means the US has a current account deficit because it spends more than it produces.

So why is that? 

Because the United States has “Credit card” That's a big lump right there. "United States Federal Government" Which costs about $2 trillion more than it takes in tax revenue each year. The government sends money to people and businesses, free of taxes, to offset the transfers.

Why not tax them? Because the members of Congress who voted for these budgets were funded by the wealthy who hate taxes, so the US political system has a policy that: “You can spend, but you can’t increase taxes.”

The result is that the United States has a persistent trade deficit. This spending flows out in both transfer payments and purchases of goods and services, exceeding national income by about $30 trillion, with total spending at about $31 trillion. And that's the reason for the trade deficit, but Trump blames the world.

So where does that value go? It's not that it's transferred from one place to another, it's just destroyed.

Why was it destroyed? Because “Trade” The US President doesn't understand this either. It's a mutually beneficial thing. If trade is stopped, everyone loses. It's not like one side wins and the other side loses, but everyone loses. Trump doesn't understand this basic idea because he's a real estate businessman in New York who thinks that... “There must be a winner and a loser.” always

So when Trump announced his policies, the result was $10 trillion of market value was wiped out. Everyone in the world went down. It wasn't just the US going up and everyone else going down, but everyone went down together because the world today is based on the division of labor, and Trump is destroying that structure.

Even wealthy campaign contributors, such as hedge fund managers and Elon Musk, who are backing the election, are starting to say that “It doesn't make any sense.”

The market also said the same thing, “It doesn’t make sense.”

Not only has $10 trillion gone, but as the US Treasury Secretary said, interest rates have also started to rise as people have dumped US Treasury bonds, which were once considered the safest asset in the world.

But that's not the end of the story. Trump didn't reverse the policy entirely. He kept the 10% import tariffs in place, except for one country: "China" Trump raises import tariffs to 145%

Why do this to China? Because the US political system has a “deep neurotic attachment to China.” The US hates China because China is big and successful. China has become a rival, and the US cannot accept that.

Even in the trade war with China, it is still a foolish policy, because in the trade war between the United States and China, China wins because China is not so dependent on the US market, only about 12% of China's exports, so China will be fine.

Last question, why did this happen, even though it was irrational?

Jeffrey Sachs explains that because the US is now under One-Person Rule, the US political system has failed. Everything President Trump does is an Emergency Decree.

You can go to whitehouse.gov and go to the menu. “Executive Decrees” Sure, you can see that there are many commands, and each one starts with a message that says: “By the power vested in me as President of the United States of America, I hereby declare…” This was followed by a series of nonsense announcements, even though according to the US Constitution (Article 1 Section 8), the power to set taxes and trade lies with Congress, specifically the House of Representatives, not with the President.

But after World War II, the United States became a military state in many ways. The country's laws began to include the word "emergency" more and more, until everything became linked to the emergency.

Trump doesn't have to prove anything that it's an emergency. He just says "emergency" and issues an order.

So, the “trade deficit” has become an emergency, and Trump is exercising “one-man dictatorship” powers, even his own advisors don’t know what he’s going to do.