Donald Trump’s recent recap of his 12-day, five-nation trip to Asia was overshadowed by, in typical 2017 fashion, something seemingly extraneous: the president’s sip from a bottle of Fiji Water in the middle of his address. Political media and late-night comedians seized upon this unscripted moment to point out the hypocrisy of a man who often mocked Senator Marco Rubio’s similar episode of awkward, mid-speech hydration. Less noticed, however, was the fact that just by drinking some water, the president had unwittingly debunked a central tenet of his “America First” trade policy.
One of the most—if not the only—consistent aspects of President Trump’s public policy is a mercantilist desire to reduce America’s trade deficits. It was a common refrain of the Trump campaign and hasn’t dipped in popularity since the man took office. In his Asia speech, Trump mentioned trade deficits three times, indicating on each occasion that their diminution is a primary objective of his administration. In short, he argues, because the United States imports more from certain countries—in this speech, China and South Korea— than it exports to them, we are “losing at trade” due to those countries’ cunning manipulation of our market access generosity.
Unfortunately, the president’s rhetoric is as myopic and misguided as it is incessant, and his clumsy swig of Fiji Water lucidly demonstrated why.
The United States has a persistent trade deficit in goods with Fiji, totaling approximately $150 million in 2016 and on pace to exceed that this year, according to the latest Census Bureau data. Much of that imbalance is due to imports of Fiji Water, which is bottled in the tiny island nation: According to the State Department, bottled water is one of the top three items we import therefrom. Indeed, Fiji is the number-one bottled water imported into the United States these days.
Does this mean, as President Trump often says, that America is “losing at trade” with Fiji, that the nation is treating us “very unfairly” and costing us American jobs, and that imported Fiji Water is to blame?
Of course not. In fact, it’s just the opposite.
First, Fiji Water is owned by the Los Angeles-based Wonderful Company, a $4 billion food conglomerate with thousands of American employees. A quick search of the company’s job-listings shows several California-based openings with Fiji Water, in areas like marketing, sales, supply chain management, and transportation. Thus, every bottle of Fiji Water imported—each adding to that big-and-supposedly-bad trade deficit—supports American jobs along with Fijian ones. Every dollar earned from sales of Fiji Water goes not only to those workers but to the American owners of the company (and to the U.S. and Fijian economies more broadly).
And those are only the direct benefits. As with all imported retail goods, U.S. sales of Fiji Water support tens of thousands of American employees (and American companies) who work every day to get that water from a ship in the Pacific Ocean to the president’s lips. Transportation, wholesale trade, and retail sales—there’s an entire ecosystem built up around imports and the global trading system.
Second, some quick research reveals that each bottle of Fiji Water is itself part of a pretty complex global supply chain. The bottles are made in Fiji (along with the water, of course) from plastic pellets produced in Thailand; the caps are made in Taiwan; the labels and shrinkwrap are made in New Zealand and Australia; the cardboard shipping pallets are made in the South Pacific. Thus each bottle of Fiji Water has value added from all over the world, not just Fiji—an important fact totally hidden in a statement of gross trade balance, which treats a good or service as if it were wholly produced in the listed country of origin. These supply-chain complexities are why groups like the World Trade Organization have created databases that track actual trade in value-added and a big reason no serious trade expert looks to gross balances to assess a trading relationship.
Such a dynamic is common in today’s complex global economy. One famous study of the iPhone found that while each device imported into the United States from China accounted for around $300 of our trade deficit, Chinese suppliers earned only about $10 from the item’s production and shipment. California-based Apple and its domestic affiliates, meanwhile, receive hundreds of dollars from an iPhone’s final U.S. sale (for things like design, marketing, retail sales, and even some manufacturing). President Trump’s trade team misses all this and instead treats trade balances like a scoreboard and imports like the other team’s points.
So a simple bottle of Fiji Water isn’t just a small addition to an ever-growing list of silly presidential moments; it actually shows how imports can benefit U.S. consumers and workers, how global trade is win-win, how the U.S. trade balance with Fiji or any other country is an almost worthless barometer for assessing economic policies, and how dangerously incorrect the president’s views on trade are. Political journalists who neither study nor make U.S. trade policy can be forgiven for missing these basic economic realities. The White House, on the other hand, has no excuse.
Scott Lincicome is an international trade attorney, adjunct scholar with the Cato Institute, and visiting lecturer at Duke University. The views expressed are his own.