REBALANCING THE UNITED STATES CURRENT ACCOUNT THROUGH CONFRONTATION AND TARIFFS

Abstract

This paper reviews and highlights major shift in views and approaches to the international economic order and the policies aimed at rebalancing that order in the perceived interest of the US by the current Trump administration. It presents the problem of the long-existing US current account and budget deficits and the perception that they present an unsustainable and immediate problem that needs urgent action as the cause of these shifts. It provides an overview of previous actions by presidents Nixon and Reagan regarding the rebalancing of the US current account deficits. The policies of the current US administration regarding the problem of dual deficits is so radical that it has willfully put an end to the international economic order through unilateral action. There have been some attempts at providing an economic analysis and justification for the direction of the applied policies. However, it seems that the policies pursued by the US administration follow an unpredictable path as they are based on bilateral deals and leverage. The paper points out that actions regarding internal macroeconomic balances such as policies that would be in the direction of lowering the budget deficit could have mitigated these problems.