U.S. trade deficit hits 10-year high as Trump trade wars backfire

Courtesy U.S. Bureau of Economic Analysis

Courtesy U.S. Bureau of Economic Analysis

Data released Wednesday morning by the Census Bureau shows that America's trade deficit increased by 12.5 percent during 2018, hitting $621 billion by the end of past year (and $891 billion if only goods are considered, instead of goods and services combined).

The department's final 2018 trade report, which was delayed by the government shutdown, showed that the United States bought far more in foreign goods than it sold to customers in Europe, Asia, North America and Africa.

However, 2018's deficit is higher than the $552.3bn recorded in 2017.

The figures undermine a key commitment by President Donald Trump, who promised to cut the trade imbalance on the belief that it would bring back overseas factory jobs and bolster the broader US economy.

"While not economically significant, the data point has gained political importance as President Trump ties his success to the trade deficit", a team of researchers at the Center for Strategic and International Studies think tank wrote in a research note Wednesday. Of that $621 billion chasm - up $119 billion from 2016 - most came from USA money going for Chinese goods. After the latest round of trade talks, the United States president pledged to prolong the temporary truce, extending the deadline for further tariffs. Trump asked China to abolish tariffs on USA agricultural products earlier this month.

"They're moving along well and we'll see what happens", the president said during a meeting in the Oval Office, referring to the trade talks.

Today, the US economy is healthy, with economic growth relatively robust.

The dollar is now valued 19 per cent above its 10-year average against the currencies of major USA trading partners, according to Federal Reserve data. Americans want to buy things affordably, and with a hot economy, there is money to buy them.

The blow-out in the deficit was both predictable and understandable and underscores how limited the "Make America Great Again" and "America First" approach to trade is within complex global trading and financial systems. Consumer goods imports jumped 2.4 billion US dollars, boosted by a 0.7 billion USA dollars increase in imports of household and kitchen appliances. After all, the new NAFTA looks an very bad lot like the old NAFTA, plus some language cribbed from the Pacific trade pact Trump pulled us out of. "The costs of the trade war are quite large relative to optimistic estimates of any gains that are likely to be achieved", the report said.

The news comes after Trump insisted that a trade war with China would be "good" and "easy to win."

The deficit, which is the difference between the goods and services the US buys from other countries and those it sells to them, rose to a seasonally adjusted $59.8 billion in December - an increase of nearly 19 percent.

And as economists predicted, several recent studies found that the total amount of money raised from increased tariffs came from USA businesses and citizens.

US and Chinese officials have hinted that some kind of agreement could be finalized by the end of March, with Trump and President Xi Jinping possibly meeting to formalize the deal at Trump's private club in Mar-a-Lago, Florida.

But the blowback from the Trump tariffs - and China's retaliatory import taxes on US goods - has been steady, at home and overseas.

And with the country is on its way to becoming a net energy exporter, crude sales overseas more than doubled to $47 billion.

Another is that other countries have levied their own retaliatory tariffs on our own products - most famously, red-state goods such as soybeans and bourbon.

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