Published: Sat, March 09, 2019
Worldwide | By Stella Potter

US trade deficit for goods reached record $891B in 2018

US trade deficit for goods reached record $891B in 2018

The US trade deficit with China last came to a record amount of 419 billion dollars.

In Trump's first two years in office, the overall deficit in traded goods and services has surged by almost one-fourth - and it's in large part due to the president's own policies.

Analysts noted with irony the US trade deficit has deteriorated despite Trump's protectionist trade policies that allegedly protect USA firms from what Trump claims is unfair foreign competition.

The United States previous year imposed tariffs on $250 billion worth of goods imported from China, with Beijing hitting back with duties on $110 billion worth of American products, including soybeans and other commodities. And by themselves, they don't typically produce any meaningful change in the trade deficit. And he may settle for a deal that falls short of Beijing agreeing to make concrete and enforceable changes to curb theft of USA intellectual property, including cybertheft. "If President Trump really is focused on economic growth, then he should be welcoming these big trade deficits".

Lawrence Summers, a Harvard economist and former chairman of President Barack Obama's National Economic Council, told The Times that "the trade deficit is a bad metric for judging economic policy". But as trade attorney Scott Lincicome notes, Trump is unable to claim credit for that good news because he's spent so much effort promising the opposite.

The president has repeatedly argued that the trade deficit is "unsustainable" and classified it as transferring wealth from the foreign countries.

The tax cuts may also contribute to the jump in trade deficit.

The President has successfully negotiated new agreements with South Korea, North American neighbours Canada and Mexico, and appears close to a deal with China. It's particularly concerning for the president, as reducing the gap between imports to the United States and exports was one of his key policies for election. A trade deficit reducing tariff would have to be much higher, perhaps even exceeding the 25 percent that was supposed to apply two months ago. By the same logic, it's no surprise that America's trade deficit shrunk dramatically during the recession that followed the 2008 economic crisis.

Other data on Wednesday suggested some slowing in the labor market, though the pace of job gains remains more than enough to drive the unemployment rate down. He has also threatened even more tariffs, including an additional hike in tariffs on Chinese goods, a new "national security"-driven duty on auto imports, etc".

Between 2017 and 2018, USA exports to China dropped by more than $9 billion, while its imports from China rose by more than $34 billion. Those are figures released Wednesday by Trump's own Commerce Department.

Exports that plummeted for a third month in a row also diminished as an answer to decelerating worldwide demand and a robust dollar which is rendering US-made merchandize less fierce on the global market.

Combined, those two trends helped push the nation's deficit in goods trade up by $9.0bn to $81.5bn.

As growth slowed in much of the world, the dollar was on the rise and exports from the U.S. started to become less competitive in other countries. The U.S. trade deficit, whose supposedly disgusting, disgraceful size Trump ran against in 2016, is now effectively his. There is a strong likelihood Trump might walk away from the ongoing trade talks with China.

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