USA trade deficit hits 10-year high as Trump trade wars backfire

Ty Wright  Bloomberg News

Despite Trump's promise and his efforts to address the trade deficit through increased tariffs, after two years in office, it rose to a record $891.2 billion, The Washington Post reported on Wednesday. The government also sought to stimulate the economy with a $1.5 trillion tax cut package, which jolted both consumer and business spending, helping to lift imported goods to a record $2.6 trillion in 2018.

Significantly, the trade deficit with China hit a record $419 billion, despite a series of tariffs the administration imposed on Chinese goods to decrease reliance on imports. The trade gap previous year was equal to only about 3 percent of that sum.

December's trade imbalance worsened because USA imports rose 2.1% as Americans bought more household appliances, mobile phones and computer products from overseas.

Trump dealt blow as US trade deficit jumps
US trade deficit hits 10-year high as Trump trade wars backfire

For its part, Beijing is publicly expressing its intent to crack down on policies that have long enabled Chinese companies and local government officials to force American and other foreign businesses to share their technology as the price of admission to the vast Chinese market.

Trump's obsession with the trade deficit is a different story, and he's latched onto the deficit itself as a root cause of economic problems. But even if the purchases amount to hundreds of billions of dollars over some years, that still wouldn't guarantee a major impact on the US trade balance.

Last year, Trump imposed a series of tariffs on Chinese goods in hopes of pressuring Beijing to support more favorable terms for the United States.

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"Perhaps Donald Trump will now discover that tweets and bluster alone won't dramatically shrink the trade deficit", said Scott Paul, president of the Alliance for American Manufacturing in Washington.

The gap between what the United States sells and what it buys from other countries rose to $59.8-billion in December from $50.3-billion in November, the Commerce Department said.

The "Tariff Man", who has described tariffs as "the greatest negotiating tool in the history of our country" and has said that "trade wars are good, and easy to win", created a benchmark for the success, or failure, of his trade policies. But increased United States growth means that the American economy sucks in more imports from the rest of the world, leading to an ever-wider trade deficit. Nominal goods exports to China tanked by 33% year-over-year in December, likely as a result of China's retaliatory tariffs on USA goods. He owns it. So how's the trade deficit going?

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With US customers resuming requesting imported phones, laptops and computer accessories mainly from China analysts said the trade rift was probably to broaden further and predict that the US president could now intensify his impacts to inflict tariffs. He promised to turn things around by picking a few easy-to-win trade wars.

"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.

The strength of the USA dollar has also not been helpful to the administration's aims, as it makes imports relatively cheaper while increasing the price of US products to the rest of the world.

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Gary Cohn, director of the National Economic Council for the first 15 months of Trump's administration, had been president and chief operating officer of Goldman Sachs for more than a decade before he agreed to become Trump's top economic adviser.

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