An article today titled ‘Trade shifting from friend to foe of GDP growth’ says that the (U.S.) ‘trade gap’ “is expected to weigh on growth going forward” and that “As a result, protectionist sentiments could be rekindled”.  The article reports that economists surveyed by MarketWatch are looking for the trade deficit (to be reported by the U.S. Commerce Department this coming Friday) to have widened to $29.5 billion in May, up slightly from April and the 3rd straight month of increase from February’s low – see my Blog Post of yesterday on the U.S. trade deficits by clicking here.

To the extent this trend of increasing trade deficits – which in part relates to lower U.S. exports – is seen by others as promoting U.S. protectionism I offer the following comments:

•    why wasn’t U.S. protectionism a ‘forefront’ issue when the U.S. monthly trade deficits were running at $60 billion per month (as late as last October) and the U.S. cumulative trade deficit was going through the roof - multiplying by 3.5X in the 9 year period ended 2008 to $7.1 trillion?;

•    U.S. protectionism in my view is inevitable.  I have said that many times previously on this blog.  I don’t see how it can turn out otherwise.  Last night my wife and I watched a nature film the showed the ‘annual’ sardine run up the east coast of South Africa.  In a ‘good year’ billions of sardines run ‘en mass’ up the that coast in December as they follow the change in ‘cold and warm water’ ocean currents.  The predators that depend on this sardine run for their very existence are dolphins (who school in numbers up to 5,000), gannets (birds that in very large numbers dive as deep as 60 feet into the water for the sardines), seals, sharks, and a particular type of large whale who eats up to 10,000 sardines each time it opens its mouth.  This ‘balance of nature’ is fragile.  It is dependent on the cold/warm ocean currents behaving in a certain way, which is in turn dependent on climate consistency or change.  In bad times the seals eat the gannets – but only for the sardines in their stomachs.  In good times all the predators swim (or in the case of the birds, paddle) freely and safely among one another as they gorge on the sardines.  Consider this:  why in the end will world countries behave differently than the dolphins, gannets, seals, sharks and whales.  This is nothing more than Darwinism.

In my view it is naïve to think the U.S. is not now and will not going forward evoke protectionist economic measures.  Personally, I don’t think those measures will work very well and I think they could well lead to further as yet ‘fleshed-out’ consequences – but I do think it likely is happening now, and will escalate over the next few months and years.

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