USA trade deficit hits 10-year high despite tariff war


Globally, the trade deficit jumped from $796 billion to $870 billion between 2017 and 2018, an increase of $74 billion. Even worse: Our deficit in goods, which Trump for some reason emphasizes most, just hit its largest level ever.

2018 was the first year since 2007 in which not a single month had a smaller trade deficit with China than the same month in the year prior.

Weinstein said the President appears to be relying on a 2018 analysis of data from the 1990s, when the United States represented a larger share of the global economy and enjoyed more leverage over exporters in other countries. Anxious about a continued drag from trade, some economists are also revising downward their forecasts for economic growth for the first quarter of 2019.

Despite the "victory" in the coercive negotiations with Canada and Mexico that led to the re-writing of what used to be the North American Free Trade agreement, there was a $US19.8 billion deficit with Canada and a $US81.5 billion deficit with Mexico - the biggest deficits in a decade.

It is a case of textbook economics catching up with some of Trump's unorthodox economic policies.

The US merchandise trade deficit with China, which is now the focus of the Trump administration's trade policy, increased to $419.2 billion, the release said.

Going forward. For days, there have been reports of progress in the trade talks between the US and China and while negotiators will take notice of the deficit number, it's not clear exactly whose hand it strengthens in the ongoing talks.

That has been exacerbated by the tariffs, which have not only been blunted by the currency relativities but have been largely absorbed by USA companies or passed on to United States consumers in the form of higher prices.

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Despite signals from Chinese and US officials that some truce could soon be at hand, there are few signs of any truly transformed trade relationship. The dollar's climb was partly due to a series of rate hikes by the Federal Reserve.

Simultaneously, other countries - including China and members of the European Union - have not been doing so hot. Exports are weakening because of slowing global demand and a strong dollar, which is making US -made goods less competitive on the worldwide market.

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

So in some ways then, Trump's preferred metric of "winning" is a victim of his own fiscally driven economic success.

"The costs of the trade war are quite large relative to optimistic estimates of any gains that are likely to be achieved", wrote the trio of economists.

Also, the dollar strengthened against other currencies in the latter part of 2018, making foreign goods more affordable for Americans.

For the full year, exports rose 6.3 per cent to $US2.5 trillion as shipments of goods including crude oil, petroleum products and aircraft engines increased.

A trade deficit occurs when a nation's imports exceed its exports. Computer imports also increased 0.7 billion US dollars. 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.