Neil Irwin has a good think piece on Trumpism and the trade deficit; but as Dean Baker rightly suggests, it arguably suffers a bit from being a discussion of the effects of trade deficits in normal times. And these times aren’t normal.

In normal times, the counterpart of a trade deficit is capital inflows, which reduce interest rates, and there’s no reason to believe that trade deficits reduce employment on net, even if they do redistribute it. But we are still living in a world awash with excess savings and inadequate demand, where interest rates can’t fall (or at any rate not much) because they’re already near zero. That is, we’re in a liquidity trap. And in that kind of world it’s true both that trade deficits do indeed cost jobs and that there are basically no benefits to capital inflows — we already have more desired savings than we are managing to invest.

One indicator of how the rules differ in these circumstances: Remember all the hand-wringing about our dependence on Chinese financing, and how U.S. interest rates would spike if the Chinese stopped buying our bonds? Well, the Chinese have stopped buying bonds and started selling them. Here’s the annual rate of change of Chinese reserves:

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And US interest rates remain very, very low — still under 2 percent on 10-year bonds.

I’m not saying that Trump has any idea what he’s talking about; he doesn’t. But we are living in a world where, for the time being — and maybe for a long time to come, if secular stagnation theorists are right — mercantilism makes a fair bit of sense. But then Keynes could have told you that.