Trump warned over new trade deficit formula


WASHINGTON — U.S. President Donald Trump has reportedly ordered a change to the U.S. trade deficit calculations to bolster his argument against trade deals, but analysts say this could undermine a key economic indicator. The news follows other reports that the Trump team also has directed career staffers at the White House to engineer unusually rosy growth and revenue forecasts to support ambitious budget proposals from the new administration.

These moves have stoked fears about the credibility of economic data under Trump. Over their objections, officials at the office of the U.S. Trade Representative’s office last week produced new trade balance data using a methodology that exaggerates deficits with key U.S. trading partners such as Mexico, The Wall Street Journal reported Sunday. The picture of yawning trade gaps could help Trump’s stance that the U.S. is getting the short end of the stick in free trade deals. At issue in the new trade figures is the question of “re-exports,” or imported goods which transit the United States on their way to be sold in a third country. By excluding those goods from the tally of U.S. exports, but keeping them in the calculation of imports, trade deficits would appear to be much larger than the official data indicate.

Alan Deardorff, professor of international economics at the University of Michigan, said altering the data — which is calculated in a common format in many countries — is problematic.