U.S. trade deficit surges to 10-year high in 2018

U.S. trade deficit surges to 10-year high in 2018

Trump has always been convinced that the United States gets a raw deal from its trade ties.

The Wall Street Journal and The Washington Post Wednesday morning report that under President Trump, the USA trade deficit on goods has skyrocketed to the largest in history. "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. But as trade experts have pointed out, these new rules may be so costly to comply with that they could have the opposite of their intended effect, leading manufacturers to source less rather than more content from North America.

The data shows that Trump's America First policies to close the trade gap haven't had their desired effect.

After eliminating the influence of prices, which renders the numbers used to calculate gross domestic product, the goods-trade deficit widened to $US1.01 trillion in 2018 from $US935.3 billion in 2017.

The goods trade deficit with China, which Mr Trump and his officials have sought to address by imposing tariffs on Chinese products worth $250 billion, widened by 11.6 per cent to a record high of $419.2 billion. Beijing retaliated with levies on $110 billion on produce imported from the US.

Trump declared on Twitter last April as the trade deficit exploded under his watch.

Exports also rose, but not enough to chip away at the imbalance.

While that reserve currency status does handicap the competitiveness of USA exports, it lowers borrowing costs for United States borrowers and enables Americans to enjoy a higher standard of living than they would if there were no trade deficits.

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"We compute that tradeable real wages fall the most in heavily GOP counties because of the [trade] war", the study found.

The immediate drivers of the surge in the trade deficit under Trump have been the fiscal expansion resulting from the tax cuts he pushed through Congress and the stronger dollar that resulted, partly from the juiced economy that expansion helped create.

American purchases of foreign autos, computers and machinery, and consumer goods, as well as foods and animal feeds, also were the highest ever. Capital goods imports increased $2.7 billion, with imports of computer accessories rising $0.7 billion.

In addition, Washington has sought increased Chinese purchases of United States goods, including farm and energy commodities and manufactured products, to reduce a U.S. trade deficit with China that it estimates at more than US$417 billion for 2018. But while that might be of concern for Trump, many economists disagree with his emphasis on reducing the deficit.

The "Tariff Man", who has described tariffs as "the greatest negotiating tool in the history of our country" and has said that "trade wars are good, and easy to win", created a benchmark for the success, or failure, of his trade policies. Meanwhile, the surplus in services kept rising, hitting a record $US270.2 billion previous year.

The duties cost consumers $1.4 billion a month and businesses $3 billion a month by the end of past year, according to research released last week by Mary Amiti, an economist at the Federal Reserve Bank of NY, and economists from Princeton and Columbia universities.

Is what is now politically and historically "Trump's trade deficit" really his fault? Stocks on Wall Street were trading lower as investors awaited fresh developments on the trade negotiations.

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