This chart shows why Donald Trump is wrong about the trade deficit between the US and Mexico

Cans of Mexican Corona beer are pictured in a supermarket in Mexico city on September 28, 2016. Belgian-Brazilian brewer AB InBev savoured its status as the global leader in the beer industry after investors approved Wednesday its buyout of British rival S
Source: RONALDO SCHEMIDT/Getty Images
Cans of Mexican Corona beer are pictured in a supermarket in Mexico city on September 28, 2016. Belgian-Brazilian brewer AB InBev savoured its status as the global leader in the beer industry after investors approved Wednesday its buyout of British rival S
Source: RONALDO SCHEMIDT/Getty Images

President Donald Trump started Friday morning off by tweeting a dig at Mexico, saying their taking "advantage of the U.S." has gone on "long enough."

Trump doubled down on the comments in an afternoon press conference with United Kingdom Prime Minister Theresa May, saying that Mexico has "beat us to a pulp" and made us "look very foolish" in the past. 

"We are gong to be working on a fair relationship and a new relationship," Trump said. "But the U.S. can't continue to lose vast amounts of business .... that won't happen with me. We're no longer going to be the country that doesn't know what it's doing."

Trump makes a big deal about the "trade deficit" because the number is large on paper: $60 billion. A trade deficit is when one country (in this case, the U.S.) buys more stuff from another (in this case, Mexico) than they sell.

Indeed, the deficit has grown by billions of dollars since 1993, when the North American Free Trade Agreement came into effect.

The problem is — as Mic has written previously — the U.S. is not actually losing "vast amounts of business" because of our trade relationship.

As economists point out, the trade deficit is not a good measure of how much trade relations help or hurt an economy: If you're selling literally hundreds of billions of dollars worth of goods to a partner, it doesn't matter so much if they're selling a little bit more to you than you are to them. 

As you can see in the below graphic from the Washington Post, placed in a greater context, the big deficit number looks relatively small.

In fact, the increasing deficit is arguably a side effect of a trend that is great for American companies and workers: Overall trade with Mexico is growing.

Mexican companies may sell more to U.S. consumers than vice versa, but the deficit is dwarfed by the growing net amount of economic activity.

This is why revoking the North American Free Trade Agreement isn't a job-creation panacea, and why it could actually end up hurting jobs in the long run.

That $236 billion in exports helps employ a lot of people. 

As Neal Rothschild and Christopher Matthews put it in a column for Axios, "you'd rather have $10 worth of exports and $15 worth of imports than $8 of both and no trade deficit."

That's one reason people freaked out when Trump press secretary Sean Spicer floated the idea of funding the $25-billion wall between Mexico and the U.S. using a 20% border tax — a move that could provoke a trade war.

There are two possibilities about what Spicer meant: One is a tariff, which could force American consumers to pay more for imported products, like phones, TVs, clothing and fresh produce (goodbye, affordable guacamole). 

Another is that Spicer was referencing a GOP proposal to reform corporate taxes by applying a so-called border adjustment. That would likely not help U.S. exports, and would actually result in less government revenue — leaving yet another big question mark about how the wall would be funded.

Perhaps most importantly, all this talk about prices misses a far bigger point — that doing business with Mexico helps the two countries get along: As Lynette Lopez noted in Business Insider, Mexico is unlikely to dole out huge benefits to the U.S. by picking up our wall tab on the basis of threats alone. 

If anything, these threats are already making Mexico more antagonistic and less willing to negotiate.

Given the risks to U.S. consumers and workers, buying more avocados than we sell in return might not be such a big sacrifice.

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James Dennin

James is a staff writer covering money and millennials. Send your tips and your money problems to jdennin@mic.com.

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