The latest US trade data put into stark figures the results of President Donald Trump's "winning" trade policy. Having talked up his tough line on competitors, stopping other countries "ripping off" the US and slashing America's trade deficit, he can now proudly boast … a deficit at its highest level in a decade.
To Mr Trump the economic reality and complexity of what a deficit actually means is irrelevant. Through the "America First" lens with which he views the world, it comes down to a simple matter of winning and losing. Countries that export are winners. Imports are for losers.
In Mr Trump's view trade deficits -- specifically bilateral deficits with economies such as China or the EU -- are proof that America has been taken advantage of, something that weak leadership by his predecessors has allowed to happen. His solution to winning again: reasserting America's strength through tariffs, protectionism and lashing out at key allies and trading partners who fail to fall into line.
Mr Trump's fixation on deficits conveniently ignores the views of practically all economists -- myself included -- that bilateral trade deficits on their own mean very little, especially when it comes to measuring which party might be winning or losing most from the relationship. When I pay for a haircut, my barber does not "win" nor do I "lose" from the transaction. We both gain.
For the same reason, a US deficit of $419.2 billion with China does not mean America has "lost" $419.2 billion into Chinese wallets.
Mr Trump claims his tough stand means that America is "winning again". But whilst his abrasive, shoot-from-the-hip style may go down well at campaign rallies, what impact does it actually have on trade and trading relations?
In a recent research study I found that during Mr Trump's first year, his toxic approach to international relations actually led US exports to slide by more than $3 billion from where they would have been.
The study centres on the use (and abuse) of "soft power" -- a concept which refers to the ability of one country to influence others through persuasion and the attractiveness of its culture, ideals and policies. In contrast "hard power" refers to military or economic force to coerce or pressure others to behave in a certain way. America's military and economy give it plenty of hard power; but Mr Trump's noxious personality costs America considerable soft power.
To measure the impact of soft power my study compiled data from a range of global surveys that track foreigners' perceptions of various major world powers and whether they are seen as having a positive or negative influence. These surveys are conducted annually by groups such as Gallup, the BBC and the Pew Research Institute and give a clear picture of a country's attractiveness to foreigners -- in other words its soft power. The results were then compared with corresponding trade figures.
From this it emerges that a 1% percent increase in a country's leadership approval causes an increase in exports of around 0.66%. In other words exporters sell more to countries which have a higher approval of the exporting country's leaders. A similar affect happens in reverse -- a 1% increase in disapproval of the exporter's leadership results in a 0.35% decrease in exports.
At face value these fractional percentage changes may seem relatively small, but when applied to the vast sums associated with international trade they become economically highly significant.
Looking at foreign perceptions of the United States specifically, between 2016 (the last year of the Obama presidency) and 2017 (Mr Trump's first year in office), average net approval by foreigners of American leadership dropped by 24%, from +16.6 to -7.4. This leads to a conservative estimate that plunging foreign perceptions of Mr Trump and America's leadership wiped at least $3.3 billion off US exports.
In fact the figure is likely considerably higher, given that in Canada and Mexico (by far America's largest export markets) net approval of America's leadership sunk by more than 60% during Mr Trump's first year.
The message here is that soft power -- the ability of one country to attract another -- is important in both understanding and influencing international trade. When countries like or approve of other countries they are likely to buy more from them.
It's a subtlety that is likely beyond Mr Trump's zero-sum view, where "wins" by one party in a transaction must come at the expense of another. Nonetheless, this is the view that drives Mr Trump's volatile and confrontational approach to global trade.
China in particular has been top of Mr Trump's hit list. The US trade deficit with China is the result, he says, of Beijing not playing fairly and weak American leaders not doing enough to stand up to it. On issues of intellectual property theft, currency manipulation and other alleged rule breaking, Mr Trump has a point. But by fixating on the relatively meaningless bilateral deficit as if it were some kind of scorecard, his approach is undermining important global relationships as well as America's standing within them.
It is also counterproductive. The latest trade figures show the US deficit with China widened last year by $43.6 billion as US exports fell and imports from China rose. Indeed, as a result of Mr Trump's trade war with Beijing, US exports to China were down nearly 50% in December on the same month a year earlier.
Whilst Mr Trump may talk up his deal-making, pro-business credentials, the study shows that his confrontational approach has actually caused a significant hit to US exports. It is not the only factor for sure, but it certainly hinders rather than helps when it comes to trade.
With his insults and Twitter threats, Mr Trump, it seems, has little regard for the concept of soft power -- perhaps because he equates it with weakness. There is little sign that he intends to tone down his impulsive approach to international relations.
Yet soft power is indeed powerful: it influences trade, delivers commercial return and, through its impact on key political relationships, affects national and global security. Put another way, countries do well by doing good.
Professor Andrew K Rose has been appointed dean of the National University of Singapore (NUS) Business School, starting in June 2019. He is currently the Bernard T Rocca, Jr Chair in International Business & Trade, Haas School of Business, at the University of California, Berkeley.
