US Trade Deficit Widens


Despite Trump's promise and his efforts to address the trade deficit through increased tariffs, after two years in office, it rose to a record $891.2 billion, The Washington Post reported on Wednesday.

Wednesday's figures illustrated how the trade war boosted the trade deficit with China: merchandise exports to the Asian nation fell $US9.6 billion previous year, while imports rose $US34 billion.

But the deficit has been a long-standing bugaboo for Trump.

President Donald Trump's "America First" policy led to new trade agreements with Canada and Mexico and has driven the administration to seek a more favorable deal with China. "It has become a number that fundamentally matters because it is a statistic to which Trump is accountable".

Some of this is likely due to the ongoing trade war between the US and China. A new economic downturn would mean the trade deficit is reduced, but that's hardly an ideal situation.

Agriculture workers, in particular, have argued that they already are the collateral damage.

Wall Street stocks finished as they started on Wednesday - in the red - as investors continued to keep an eye on any trade developments between the USA and China. The U.S. goods trade deficit with China hit a record $419.2 billion in 2018. Isn't that what we're all kind of wondering here? If Trump walks away from the negotiating table during Xi's visit, markets would take that "very negatively", Kushma said.

Put another way, by Trump's own benchmark, the U.S. is 20% worse off than it was at the end of 2016, just before he took office.

Christine McDaniel of the Mercatus Center at George Mason University says that should come as no surprise, given that the USA runs a low saving rate and a very high consumption rate compared to other large economies like China.

US Trade Deficit Widens

The release of the December report was delayed by a 35-day partial shutdown of the government that ended on January 25.

Looking at December alone, exports fell by 1.9% to $205.1 billion and imports rose by 2.1% to $264.9 billion.

The latest report revealed that the trade deficit with China in December was $38.7 billion, by far the highest of any nation.

Though the Chinese tariffs have already had an impact, they are not the only trade issue that could have an impact on American consumers. The answer largely (though not exclusively) has to do with Trump's own economic policies. European Union trade commissioner Cecilia Malmstrom traveled to Washington this week to meet with U.S. Trade Representative Robert Lighthizer to advance some sort of long-term trade pact.

These measures have had the opposite effect and his tax policies have boosted USA consumption, with a lot of that spending going to other countries. USA stock futures were marginally lower.

As growth slowed in much of the world, the dollar was on the rise and exports from the USA started to become less competitive in other countries. Rather, Trump's main "culpability" in trade is that his cuts in taxes and regulations have the USA economy outperforming most of the rest of the world.

As historical data shows, trade deficits usually jump following tax cuts, like the 2001 and 2003 tax cuts under President George W. Bush, and President Ronald Reagan's cuts in the early 1980s.

Trump's supporters point to his talks with China and other United States trading partners along with the renegotiation of Nafta as efforts that will help reduce the U.S. trade deficit.

Anything could happen, as Trump himself said on Wednesday: It's "either going to be a good deal or it's not going to be a deal".

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