US Trade Deficit Surges to 10-Year High in 2018

Trump promised to shrink the trade deficit. Instead it exploded

News on Wednesday that our nation's trade deficit in goods hit an all-time record of $891.3 billion previous year was widely reported as though it had come as some kind of a surprise. The U.S. responded with additional tariffs of its own, and China responded in kind. Last year, he started with foreign steel and aluminium and a number of imports from China. So there has been less demand for US exports. He put $250 billion in tariffs on Chinese goods last September in an attempt to alter the balance of trade with China and increase leverage over the world's second-largest economy at the negotiating table.

Official data, however, shows that while exports of United States goods and services rose by Dollars 148.9 billion a year ago, imports jumped by USD 217.7 billion.

The White House has argued that reducing the trade deficit would boost annual economic growth to its goal of 3 percent on a sustainable basis.

Thomas Duesterberg, a senior fellow at the Hudson Institute, says in the long run that means continuing to sell American technology to China. According to the Washington Post, it is the largest merchandise trade deficit in the 243-year history of the United States. Computer imports also increased 0.7 billion USA dollars.

Beijing has offered to buy more American farm goods and energy - a pitch that Xi made to Trump when they met during a December dinner at a global conference in Buenos Aires with the idea of narrowing the USA trade gap with China. "When we impose a tariff, it is the domestic consumers and purchasers of imports that bear the full cost of the tariffs", said David Weinstein, an economics professor at Columbia University, who co-authored one of the papers.

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"Workers in very Republican counties bore the brunt of the costs of the trade war", the report said, "in part because retaliations disproportionately targeted agricultural sectors, and in part because USA tariffs raised the costs of inputs used by these counties". But the tariff hikes have since been postponed as the administration has cited progress in trade talks with China. Tightening fiscal policy and increasing incentives for savings are two ways to help lower the deficit, neither of which has been pursued by the Trump administration.

The strong dollar matters because it has led to near-record deficits in manufactured goods and non-oil goods that are being masked by increases in exports of oil and services, Scott said.

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

On the China front, reports continue to be published that Trump is pushing for a deal, in order to be able to announce victory and boost his 2020 campaign for the United States presidency. Trump attacked Obama over the deficit for years, accusing him of "bankrupting our country" and calling the trade deficit "one of our greatest national security threats". Tariffs lead to higher prices paid by consumers, so when the president and administration officials cite an influx of tariff-related funds to the US government, USA consumers are largely the ones footing the bill.

Trump's tariffs also may cause U.S. companies to write off sizable investments in their Chinese factories as they scramble to shift operations to safer venues, said the study by Weinstein, Amiti and Redding. Former San Antonio mayor Jullian Castro, whose state is the fifth most reliant on trade knows the risk of trade wars. In sum, his entire trade policy has failed and in fact been counterproductive.

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