Fact check: Trump wrong on tax rates and Canada

Fact check: Trump wrong on tax rates and Canada

In an interview with The Economist, US President Donald Trump got a number of economic facts wrong.

His figures on the Canada-US trade balance were upside down, he misplaced the US in the world ranks of tax burdens and claimed to have coined an economic phrase that has been familiar to economists for some 80 years.

A look at some of his assertions to the magazine:

Mr Trump: "We're the highest-taxed nation in the world."

The facts: Mr Trump has repeatedly made variations on this false claim.

The overall US tax burden is actually one of the lowest among the 32 developed and large emerging-market economies tracked by the Organisation for Economic Co-operation and Development (OECD).

Taxes made up 26.4% of the total US economy in 2015, according to the OECD.

That is far below Denmark's tax burden of 46.6%, Britain's 32.5% or Germany's 36.9%.

Just four OECD countries had a lower tax bite than the US: South Korea, Ireland, Chile and Mexico.

Mr Trump qualified his claim later in the interview by saying the top marginal corporate tax rate, specifically, is higher than in similar industrialised countries.

That is more or less true, although the higher rate is moderated by tax breaks not available in some of those other countries.

Mr Trump: "Right now the United States has... about a 15 billion US dollar (£11.6bn) trade deficit with Canada."

The facts: His numbers are upside down. The United States actually ran an 8.1 billion dollar (£6.3bn) trade surplus with Canada last year, according to the latest numbers available from the Census Bureau.

A 24.6 billion dollar (£19bn) US surplus with Canada in the trade of services, including tourism and software, outweighed a 16.5 billion dollar (£12.7bn) deficit in the trade of goods, including cars and oil.

Mr Trump, who regularly decries the loss of American manufacturing jobs, tends to emphasise trade in goods and ignore trade in services.

His comment about Canada came as his administration seeks a renegotiation of the North American Free Trade Agreement with Canada and Mexico.

The US ran a deficit of 750 billion dollars (£580bn) in goods with the rest of the world last year but recorded a 249 billion dollar (£193bn) surplus in services.

Mr Trump: "You understand the expression 'prime the pump'? ... I came up with it a couple of days ago and I thought it was good. It's what you have to do. We have to prime the pump."

The facts: He did not coin that phrase. It is a well-worn metaphor for generating faster growth, first made popular as an economic analogy more than 80 years ago during the Great Depression.

The Merriam-Webster dictionary people quickly tweeted that the phrase "priming the pump" has been around since the early 1800s.

Literally, it is about pouring water into a pump to allow it to create suction.

The phrase was commonly used by mining publications during the 1920s, but it took on new significance after the economy cratered during the Depression.

By 1933, President Franklin D Roosevelt had promoted the idea of flushing money into the economy to stimulate stronger growth with his New Deal policies.

Such policies rankled Mr Roosevelt's predecessor, Herbert Hoover.

"One of the ideas in these spendings is to prime the economic pump," Mr Hoover said in a 1935 post-presidential speech.

"We might abandon this idea also, for it dries up the well of enterprise."

Mr Trump, on backing away from his campaign promise to label China a currency manipulator: "They're actually not a currency (manipulator). You know, since I've been talking about currency manipulation with respect to them and other countries, they stopped."

Treasury Secretary Steve Mnuchin, pitching in: "Right, as soon as the president got elected, they went the other way."

The facts: Mr Trump persists in taking credit for something that happened before he even started running for president.

China manipulated its currency, the yuan, lower for years before stopping in mid-2014; Mr Trump's presidential run began a year later.

A weak yuan helps Chinese exports because it makes them cheaper to buy. It disadvantages goods from the US and other countries because they are more expensive to get in China.

Until 2005, China pegged the yuan to the dollar at a specific level. When it loosened the peg, the yuan began to rise steadily against the dollar.

Worried that a strong currency would hurt their exporters, Chinese officials bought dollars to prevent the yuan from rising even faster.

The value of the yuan peaked in early 2014, as the Chinese economy slowed after years of torrid growth.

The yuan then began to fall relative to the dollar, but not because Chinese officials were once again intervening to push it down.

China was actually doing the opposite: selling dollars and buying yuan to prevent its currency from going into a free fall.


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