US President Donald Trump dealt blow as US trade deficit jumps


Despite President Donald Trump's repeated promise to shrink trade deficits, it leaped by 12.2% to $621 billion in 2018, after hitting a record high during his first year in office. The goods shortfall topped the 2006 record of US$838.3 billion, set as the housing bubble was peaking, and marked the third consecutive year of rising deficits.

The real goods deficit in December reached $91.6 billion - its highest level since 1994.

A trade deficit occurs when a nation's imports exceed its exports.

If you add in the services sector, the US trade deficit is still $621 billion, $100 billion more than under President Barack Obama.

New studies have added to the evidence that the US-China trade war is inflicting pain on US consumers and businesses, even while President Donald Trump insists that the US is well positioned to weather the storm should he back away from a trade deal.

Over the past year, even as he imposed tariffs on foreign-made solar panels, washing machines, steel, aluminum and assorted goods from China, imports roared ahead of exports.

But soybean exports, a crucial crop across vast expanses of the country, fell 18 percent for the year to $18.2 billion amid a Chinese boycott sparked by Trump's trade war.

Dollar said free trade is foundational to the global economy and free trade with China is a foundation for America's economic prosperity.

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But most economists say that such increased Chinese purchases would likely only divert United States shipments from other foreign customers, shrinking the trade gap with China but leaving the global balance largely unchanged. Harvard Kennedy School professor Jeffrey Frankel warned in January 2018 that "the increase in spending afforded by tax cuts goes entirely, rather than only partly, into the current-account deficit".

But America's dependence on imports seems to have increased after the tariffs that Mr. Trump imposed previous year on foreign steel, aluminum and Chinese products.

Despite the name, trade deficits tend to have less to do with trade policy than broader macroeconomic policy. "We can turn it all around-and we can turn it around fast", he said at the time.

Businesses likely stocked up on imports in anticipation of further duties on Chinese goods, which ironically contributed to the deterioration in the trade deficit a year ago. The trade deficit isn't necessarily a bad thing, and it's an oversimplification to look at the deficit without putting it into the context of the economy.

A paper published on Saturday by economists from the Federal Reserve Bank of New York, Princeton University and Columbia University found that tariff revenue collected by the U.S. is "insufficient to compensate the losses being born by the consumers of imports".

A BofA Merrill Lynch Global Research report in 2018 also expects the share of the trade deficit in GDP to grow 0.2 percentage points by 2020.

Trump has said the tariffs are meant to protect and take a stand against what he views as poor business arrangements with Beijing.

However, Mr Trump may choose to lift tariffs on European cars and parts after the US Commerce Department produced a report examining whether the imports threaten national security.

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