Even if the stars were in perfect alignment and the US was not facing a saving constraint, it stretches credibility to seek a formulaic bilateral solution to America’s multilateral problem. Since 2000, the largest annual reduction in the US-China merchandise trade imbalance amounted to $41 billion, and that occurred in 2009, during the depths of the Great Recession. The goal of achieving back-to-back annual reductions totaling more than double that magnitude is sheer fantasy.
In the end, any effort to impose a bilateral solution on a multilateral problem will backfire, with ominous consequences for American consumers. Without addressing the shortfall in domestic saving, the bilateral fix simply moves the deficit from one economy to others.
Therein lies the cruelest twist of all. China is America’s low-cost provider of imported consumer goods. The Trump deal would shift the Chinese piece of America’s multilateral imbalance to higher-cost imports from elsewhere – the functional equivalent of a tax hike on American families. As Hoover’s ghost might ask, what’s so great about that?
Stephen S. Roach, former chairman of Morgan Stanley Asia and the firm's chief economist, is a senior fellow at Yale University's Jackson Institute of Global Affairs and a senior lecturer at Yale's School of Management. He is the author of "Unbalanced: The Codependency of America and China."