The former chair of the Federal Reserve Janet Yellen has criticised Donald Trump’s obsession with the trade deficit with China.
Yellen stepped down from the Fed in February last year and is now an academic with a leading American policy thinktank the Brookings Institute. She was asked about the trade gap with China in an interview with radio programme ‘Marketplace’ in late February.
Discussing the trade gap with China, she said: “When I continually hear focus by the President and some of his advisers on remedying bilateral trade deficits with other trade partners, I think almost any economist would tell you that there’s no real meaning to bilateral trade deficits, and it’s not an appropriate objective of policy.”
Yellen made the comments as part of a more widespread critique of President Trump accusing him of undermining the US central bank with his criticisms and suggesting that he did not even understand its mandate.
“I doubt that he would even be able to say that the Fed’s goals are maximum employment and price stability.”
The comments come at the end of a period in which, despite Trump’s actions including the imposition of tariffs, the trade deficit with China has grown.
Despite tariffs the deficit grows
According to Chinese government data released at the start of January, the Chinese surplus grew by another 17 per cent in 2018. In total, goods bought by Americans in China exceeded the value of Chinese buying American goods by US$323.3 billion.
Economists have been warning for some time that the Trump administration is concentrating on the wrong things when it comes to disputes with China.
The Wall Street Journal’s year end survey of the economy revealed that 47.3% of leading US economists saw tariff disputes between the US and China as the top threat to the economy in 2019.
To date, the US and China have imposed tariffs on $360 billion worth of goods flowing between the two countries with US$250 billion on Chinese goods while China has responded with duties on $110 billion worth of US goods.