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In a blow to Trump, America’s trade deficit hit record US$891b

09 March, 2019, 01:19 | Author: Ted Wilson
  • U.S. President Donald Trump and China's President Xi Jinping arrive for a meeting on the sidelines of the G-20 Summit in Hamburg Germany. President Trump has often named Asia and China and Japan in particular as

You start a trade war, you should expect your exports to be hit. Trump declared on Twitter last April as the trade deficit exploded under his watch. Trump has previously acknowledged Japan's trade surplus with the USA, though prior to this week he had done little to concretely address the issue.

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

An acceleration in economic growth previous year from Mr Trump's debt-funded tax cuts helped to boost the appetite for foreign goods. That happened despite the new barriers to trade raised by the Trump administration. They reflect broader trends in the economy, including savings and investment rates.

Including goods and services for the entire year, the total deficit is $621 billion, the highest since 2008. We were at the tail end of the Great Recession then, and, because the economy was bad, Americans bought less stuff from overseas. It will do little to reduce the massive imbalance in U.S. This is partly because of the fiscal stimulus Trump has been pumping into the economy, through both his tax cuts and federal spending hikes. Sales overseas increased 6.3% to $2.5-trillion in 2018, also the highest level.

While goods exports hit a record $1.7 trillion in 2018, they declined in the last three months of the year, weighed by the U.S. He claims that the U.S. is being "ripped off" by other nations. But it's also a victim of his trade policy failures.

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He has picked trade wars the world over, with friends and foes alike. Partly yes because some of the reduction in USA exports is from China sharply reducing its purchases of several US staples, including soybeans, metals and autos. Auto tariffs would provoke retaliatory actions by the European Union, with unpleasant consequences for both sides and the global economy.

Between 2017 and 2018, USA exports to China dropped by more than $9 billion, while its imports from China rose by more than $34 billion. This means the month had a ten-year high deficit of $59.8 billion in goods and services of its own. No matter how many times Merkel points to German plants in the US producing cars and employing Americans, Trump doesn't get it. The real, trade-weighted value of the US dollar increased 21.8 percent between December 2013 and December 2018, and including 6.7 percent in 2018 alone, as shown below. The president clearly obsesses about the trade deficit, but would he really prefer that the USA economy not be humming along with both low inflation and also record low unemployment rates both overall and for just about every demographic group, even those demographic groups that solidly vote Democrat?

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. After all, the new NAFTA looks an terrible lot like the old NAFTA, plus some language cribbed from the Pacific trade pact Trump pulled us out of. "We're trying to make a deal", he said. They suggest such deficits are not a reflection of American trading relationships, but rather simply a reflection of a variety of economic forces.

But soybean exports, a crucial crop across vast expanses of the country, fell 18% for the year to $18.2bn amid a Chinese boycott sparked by Trump's trade war.

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