Trump pledge undermined as U.S. trade deficit widens

Ann Santiago
March 9, 2019

America's trade deficit in goods with the rest of the world rose to its highest level in history a year ago as the United States imported a record number of products, including from China, widening the deficit to US$891.3 billion and delivering a setback to President Donald Trump's goal of narrowing that gap.

For the full year, exports rose 6.3 percent to US$2.5 trillion as shipments of goods including crude oil, petroleum products and aircraft engines increased.

The U.S. goods trade deficit with China reached a new record of $419.2 billion in 2018, up from $375.6 billion in 2017, an increase of $43.6 billion (11.6 percent).

"My hope is that toward the end of March, there would be an announcement, anything that would open up our grains going back into China", said Kent Winter, a fifth-generation farmer near Wichita, Kan., whose exports of sorghum and soybeans a year ago were hammered by Beijing's retaliatory tariffs.

When adjusted for inflation, the goods trade deficit surged US$10 billion to a record US$91.6 billion in December.

As cash-flush businesses and consumers increased their spending, purchases of imported goods rose while the overvalued dollar weighed on exports.

Alarmingly, some analysts now warn Trump will "up the ante" to distract attention from the deteriorating trade situation. -China trade dispute, slowing global demand and a strong dollar, which is making American-made goods less competitive on the worldwide market.

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.

Farmers in the Midwest, a key part of Trump's voter base in 2016, are going bankrupt at record rates as a result of Trump's trade policies.

On an annual basis, the trade gap reached the largest total since 2008, when it was $708.7 billion.

Trump has delayed tariffs on US$200 billion worth of Chinese imports as negotiations to resolve the eight-month trade war continue.

Trump has made the trade deficit a focus of his economic foreign policy and frequently mentions it when discussing global trade.

The commerce department said the gap between what the United States sells and what it buys from other countries rose to $59.8bn in December from $50.3bn in November. "The administration's fiscal policies have helped to boost the trade deficit". Trump, who has dubbed himself "the tariff man", pledged on both the campaign trail and as president to reduce the deficit by shutting out more unfairly traded imports and renegotiating free trade agreements.

Other studies show tariffs costing USA consumers tens of billions of dollars in higher prices, not to mention the $8 billion in tax dollars sent to prop up farmers hard hit by Chinese retaliation. However, the growth in the services surplus was more than offset by the $83.8 billion increase in the goods trade deficit; thus the overall goods and services deficit increased by $68.8 billion (12.5 percent) in 2018.

Gary Cohn, director of the National Economic Council for the first 15 months of Trump's administration, had been president and chief operating officer of Goldman Sachs for more than a decade before he agreed to become Trump's top economic adviser.

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

The Commerce Department report comes amid indications that negotiations with China over a sweeping trade agreement may be in their final weeks. You start a trade war, you should expect your exports to be hit. There is a strong likelihood Trump might walk away from the ongoing trade talks with China.

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