The Hidden Risk of a Trade Deficit Reduction

A deal to reduce the trade deficit will have far-reaching consequences for the dollar

U.S. Commerce Secretary Wilbur Ross, a member of the U.S. trade delegation to China, returns to a hotel in Beijing, China May 3, 2018. Even if he manages to get the Chinese to reduce the trade deficit, the consequences for the dollar would be huge. Reuters/Jason Lee

In May, China reportedly offered the United States a $200 billion reduction in its goods surplus with the United States. It would be a major victory for the Trump administration’s tough trade policy on China.

The Chinese authorities so far have confirmed they are willing to buy up to $70 billion more agricultural and energy goods from the United States and they would be able to make good on the promise given the centrally-planned Chinese economy.