U.S. trade deficit hits 10-year high despite tariff war

President Donald Trump left listens as U.S. Trade Representative Robert Lighthizer second from right talks with Chinese Vice Premier Liu He second from left during their meeting in the Oval Office of the White House in Washington Friday Feb. 22 2

U.S. and Chinese officials have recently signalled that they are close to some kind of agreement, although China has only bolstered its commitment to investing in and developing its technology sector and questions about how to enforce any trade rules remain. It is, by and large, an accounting measure that often moves in directions inverse to the health of the United States economy.

The United States' goods and services deficit widened by $68.8 billion to $621.0 billion in 2018. That happened despite the new barriers to trade raised by the Trump administration. "It's not an accident".

"We compute that tradeable real wages fall the most in heavily GOP counties because of the [trade] war", the study found. "Analysts should expect higher deficits in the months ahead as global growth slows, and the economic expansion in the USA continues at an above-trend pace". -China trade dispute, slowing global demand and a strong dollar, which is making American-made goods less competitive on the worldwide market.

One is that USA companies have stocked up on some imported goods to beat the tariffs, which increases imports in the short run.

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

In 2016, it was $502 billion.

What's more, Trump's $1.5 trillion tax cut enacted in late 2017 served to further fuel the deficit. The Wall Street Journal reported last month that farm bankruptcy filings in the Midwest past year reached levels not seen in a decade as China, among other countries, raised barriers in response to US trade protectionism. 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. Higher imports equal bigger trade deficit. 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".

Screenshot JP Morgan
US trade deficit hits 10-year high as Trump trade wars backfire

Exports of industrial supplies and materials fell by 2.1 billion USA dollars, with shipments of petroleum products dropping 0.9 billion US dollars and crude oil decreasing 0.5 billion US dollars.

Trade gaps with China, Mexico and the European Union also reached all-time highs, despite the USA slapping tariffs on hundreds of billions in imports from its largest trading partners.

There are also some broader macro-economic influences at play, not the least of which is a weak savings rate in the U.S. as well as the role the USA dollar plays as the world's reserve currency. In a March 2 speech to a conservative political group, he called them "the greatest negotiating tool in the history of our country" and credited them with bringing trade partners such as China to the bargaining table.

But advocates of a stronger USA currency policy argue that Trump himself carries plenty of blame.

Trump has angrily described trade deficits as a defeat for the United States, and aimed to erase them, but the Commerce Department report was bristling with records as Americans snapped up mobile phones and companies invested in computer equipment in 2018. Consumer goods imports jumped 2.4 billion US dollars, boosted by a 0.7 billion USA dollars increase in imports of household and kitchen appliances. Still, U.S. stocks have regained most of their losses from the autumn when investors were more pessimistic about trade prospects.

"I think everybody's completely overestimating this, and there's a long way to go on that", former Rep. Peter Roskam, R-Ill., said at Monday's University of Chicago event.

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