Now it's Trump's trade deficit

Trade was a defining issue for candidate Donald Trump in 2016, when he lambasted American NAFTA negotiators for "the worst trade deal maybe ever signed anywhere" and an unconscionable strike against U.S. manufacturing jobs. As president he upended the Trans-Pacific Partnership for similar reasons. His biggest data point, wielded like a cudgel: America's $500 billion annual trade deficit.

But the numbers are going against Trump so far: the U.S. trade deficit was $44 billion in August, for example, above the monthly average of $42 billion in 2016, Barack Obama's last full year in office. As you see in the chart below, the 2017 monthly average of $45.6 billion is far worse than any year of Obama's presidency apart from 2011, when the deficit was $45.7 billion.

Why it matters: Trump may come to regret using the trade deficit as an economic scorecard, because its overall size is driven by forces over which the U.S. can exercise only limited influence, like foreign central bank actions or trade policies.

The tale of steel: The recent struggles of the American steel and aluminum industries exemplify the shortcomings of Trump Administration trade policy. In April, Trump announced an investigation into the global steel market, to learn whether foreign competition was damaging U.S. national security by limiting American steel aluminum manufacturing capacity.

• Imports erupted: The announcement of the investigation ignited a surge in U.S. steel imports, as buyers sought cheap steel before tariffs were enacted and U.S. trade partners retaliated.
• Now exporters have the worst of both worlds: Trump's tough trade talk is causing uncertainty in exporting industries, and Republican opposition to protectionist policies. Meanwhile, his unwillingness to ruffle Chinese feathers amid the North Korean nuclear standoff means the enactment of no new, tough tariffs or other punitive measures.

If economic nationalism is your thing, why there may still be hope: Candidate Trump departed from Republican orthodoxy, vowing to rip up NAFTA, label China a currency manipulator, and slap high import tariffs on products from countries that reject his notion of fair trade.

• So far, President Trump has declined to do any of those things, despite the fact that presidents have wide authority to act unilaterally.

• But Alan Tonelson, a former research fellow at the U.S. Business and Industry Council and longtime advocate for protectionist trade policy, argues that Trump will eventually move to enact tariffs or ax trade deals. "He won't want to face his base come election time empty handed," Tonelson told Axios.

Why it may be too late: Jared Bernstein, former chief economist to Vice President Joe Biden, tells Axios that even if Trump gets aggressive with new tariffs, he will produce few benefits for the displaced workers who voted for him. That's because jobs lost to events like China's 2001 accession to the WTO are already gone, and new tariffs won't bring them back.

• Bernstein argues that trade policy does need to be overhauled, but that more important is a more robust safety net for displaced workers, including retraining for current jobs.

Be smart: The Democratic Party are likely to lead the charge in this direction. Few elected GOP officials have rallied to Trump's anti-trade platform, and Dems, humiliated by their performance in the rust belt last year, are likely to try to capture these voters with a pitch distant from the free-trade status quo.