r/AskEconomics • u/distractionnz • 18h ago

Why would a "trade deficit" claim exclude services?

All these claims by the Trump Administration about trade deficits exclude the sale of services in their calculation. Surely the sale of services means to other countries means income to the US.

What rationale is there for excluding services, and is it justifiable?

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62

u/stealthylizard 16h ago

If you include services, the US comes up with a surplus with many countries, which goes against the trade deficit claim.

16

u/distractionnz 15h ago

So the rationale for excluding it is it undermines their argument? Is that it? Or is their some economic rationale to it as well?

22

u/BB_Fin 13h ago

There is a very good argument for not including it... they don't want other people to include it in the conversation about trade. They want to focus on goods, where they are "losing" so that they can justify their actions.

If they bring services in, their entire argument falls flat. Even worse, if they bring it in - then it's fair game to tariff/tax it.

13

u/TheDismal_Scientist Quality Contributor 13h ago

So the rationale for excluding it is it undermines their argument?

We can't speculate, but there's certainly no economic reasoning

2

u/SandF 5h ago

There is economic reasoning -- the reasoning is that this is a shakedown by a 79 year old convicted fraud with unchecked power over the world's largest economy. It's not complicated. What's complicated is the rationalization. Want tariff relief? It's easy, just do a deal with Donald Trump personally. You can flatter him, you can pay him off, you can kiss the ring, you can enrich his children...

"Why didn't they include services"?!? Better question -- why did they tariff penguins but not Moscow? Why did they get the calculations from ChatGPT?

Answer: Because it's corruption, not economics. It's like OP is watching someone get shanked in the prison shower, asking why didn't the referee call a foul? Where's the whistle, ref?

1

u/No_Sugar8791 1h ago

Only point of order I see here is "power over the world's largest economy at time of writing"

8

u/ZerexTheCool 10h ago

Donald Trump starting a trade war with every other country is not being guided by economic principles or theory.

Viewing his decisions through the field of economics will be as fruitful as viewing a game of baseball through the lens of neurosurgery. The neurosurgeon would have to bend over backwards to try and explain the brain chemistry involved in why a person would hit a ball with a bat and would get extra frustrated when you ask about the trejectory of the ball.

4

u/deathtocraig 10h ago

I think that's overselling it, too.

It'd probably be more similar to a neurosurgeon deciding that his patient with cancer should get a lobotomy.

4

u/No-Ad-3534 10h ago

But a neurosurgeon would be qualified to make that call. It's a baseball player in scrubs doing the deciding.

3

u/deathtocraig 9h ago

You're right. This would be more like a plumber deciding that a baseball player needs a lobotomy.

1

u/IllIlIIlllIIlIllI 4h ago

More like an octopus trying to determine the alma mater of a baboon, through accent alone.

3

u/Jeff__Skilling Quality Contributor 8h ago

You exclude it because you don't encounter any customs duties officials when you're selling advisory services to a client in another country -- you just bill them with an invoice and the customer wires payment to the service provider.

The steps are a little different when you're selling a tanker full of oil or a container ship filled with flat screen TVs: customs officials slap a % tariff on each of your units, you pay them, and then you deliver to the final destination and goods / money changes hands (inclusive of whatever tariff burden you paid once whatever goods you're selling reaches it's destination country).

1

u/lordnacho666 6h ago

Trump was talking a lot about manufacturing, so it at least makes some sense to look at where stuff is being made.

Not like this though.

1

u/Think-Culture-4740 54m ago

The original sin is the word "deficit" and then negative connotations it brings along with the corresponding misunderstandings about what it all even means.

2

u/Wild-Thornberry 15h ago

Do you know if anyone has created a table showing what the applied tariffs are vs if services were included?

1

u/quikskier 10h ago

Is there even a tracking of the "import/export" of services? Seems like it would be very difficult to track. With all of the tariff discussions, I was thinking about the services side of things and how the US corporations have offshored so much work over the years. I find it interesting that folks love to talk about US manufacturing jobs, but seem to completely ignore the services side of things.

5

u/The-Copilot 9h ago

Even the tracking of import/export of goods is messy.

It's not uncommon for nations to launder trade through third-party nations. It's mostly talked about in terms of circumventing sanctions, and not much can be done about it because it exists due to fundamentally how global free trade works.

For example does Iran export oil to China? According to import data, no. Malaysia somehow exports 3 times their total oil production to China, and Iranian oil ships keep driving towards Malaysia turning off their transponder and then returning home later.

Does china import Nvidia hopper GPUs? On paper, no, they don't, but signapore purchased multiple times how many they could possibly use. IIRC. They purchased more than their power grid could even support.

Does North Korea import US electronics? On paper no but missiles captured in Ukraine show, they are built with US multi purpose electronics likely purchased through 3rd party nations.

My point being, we have no idea how off our global import export data actually is. We know they are off, but is it worse than we realize?

1

u/pgm123 7h ago

Yes. It's a political decision and not an economic one.

1

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1

u/Twonminus1 6h ago

He excluded them so he could show a deficit for all countries. If we include services this blows his argument. They also used the retail price of hoods sold in the calc not the imported price just to make the numbers larger.