United States trade deficit hits 10-year high despite tariff war

Trump dealt blow as US trade deficit jumps

Removing trade in services, the goods deficit was US$891 billion, 10-per-cent higher than in 2017, and also an all-time record. 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.

But most economists say that such increased Chinese purchases would likely only divert U.S. shipments from other foreign customers, shrinking the trade gap with China but leaving the global balance largely unchanged.

There are a few takeaways from this news, including that trade was probably a bigger drag on growth last year than previously forecast. Advocates of a compromise with China have also told Trump it is crucial to cut a deal soon to reap the full boost ahead of the election because benefits such as more Chinese purchases of US soybeans and other products will have a delayed impact and take time to reverberate through the economy, they said. He has made reducing the gap a primary component of his economic and foreign policy, launching a multi-billion dollar trade war with China while adding new tariffs to imports from allies in Europe, North America and other countries.

The Commerce Department said in a report, which was delayed by the longest partial shutdown in history, that the United States imported almost $900 billion more goods than it exported overseas, the Washington Post reported.

The White House maintains that trade imbalances translate directly into thousands of job losses but while the tariffs protections help some companies, many others have struggled with higher prices and held off on investments amid the trade war. The retaliatory tariffs Trump provoked from China also hit major U.S. agricultural exports such as soybeans. Part of the gap is caused by countries that use unfair trade policies to dump goods in the U.S, but it has a lot to do with the strong consumer culture and low savings rates since the 1970s, which create robust demand for foreign goods. Beijing's longstanding policy of subsidizing its own businesses and charges that it illicitly obtains USA technology remain key obstacles. The dollar's climb was partly due to a series of rate hikes by the Federal Reserve. That typically means Americans buy more from other nations. "Bigger than ever" is a favourite Trump phrase, although I suppose he's reluctant to boast about what he regards as a bigger-than-ever bad thing.

Mr Trump, citing progress in talks, last week delayed a planned tariff increase to 25 percent from 10 per cent on US$200 billion (S$270 billion) of Chinese goods.

The relative strength of the USA economy means that it consumes more and imports more goods even as consumers and companies in China and Europe and the economies exposed to them consume less and import less.

President Trump's America First policies are not having their intended effect. Trump is trying to reach a new trade deal with China and hopes to strike an agreement with President Xi Jinping in the coming weeks, but the stakes could not be higher. With the US economy doing well while other economies are faltering, and the Federal Reserve raising rates, the dollar has strengthened, making foreign products look cheaper and making our exports more expensive (i.e., less competitive) in other countries.

"We do have concerns about certain aspects of the trade policy pursued by the current USA administration", Malmstrom said in a statement last week before the meeting, according to CNBC. So there has been less demand for USA exports.

"We compute that tradeable real wages fall the most in heavily GOP counties because of the [trade] war", the study found.

"Many Pennsylvania farmers and manufacturers have already been harmed by tariffs".

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