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

U.S. President Donald Trump needs to step forward and take brazen braggadocious credit for the trade

U.S. President Donald Trump needs to step forward and take brazen braggadocious credit for the trade

The U.S. trade deficit soared to a 10-year high of $621 billion in 2018 - the largest since 2008 - clearly proving president Donald Trump's protectionist trade policies continue to backfire and are hurting the U.S. economy instead.

Trump's comments after the Commerce Department said on Wednesday that the United States goods trade deficit surged to a record high in 2018 as strong domestic demand fueled by lower taxes pulled in imports, despite the president's tariffs and "America First" policies aimed at shrinking the trade gap.

Trump's big deficit-financed tax cuts previous year helped fuel economic growth as well as the strength of the dollar, and those trends spurred US purchases of foreign-made goods, especially from China, Mexico and Europe. Mr Trump claims the country doesn't play fair when it comes to its trade practices, and both sides keep increasing tariffs on each others' goods as a result.

In December, imports of goods and services increased 2.1 percent to 264.9 billion USA dollars.

Separate data from China's customs administration provide part of the explanation.

As cash-flush businesses and consumers increased their spending, purchases of imported goods rose while the overvalued dollar weighed on exports.

But at the end of the day the US does need to keep growing exports.

The increase was driven by some factors outside Trump's control, like a global economic slowdown and the relative strength of the U.S. dollar, both of which weakened overseas demand for American goods.

"The president talks a lot about trade, tweets about trade, blusters about trade", said Scott Paul, president of the Alliance for American Manufacturing.

In the accounting for the nation's gross domestic product - the broadest gauge of the economy - a trade deficit does subtract from growth. "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. They and other Democrats should stop mimicking Trump's economic silliness, pledge to end trade wars, vow to open up markets and then outline a generous and comprehensive package to address workers and regions adversely impacted by trade.

Trump entered office insisting that decades of trade gaps had crushed the USA economy and that he would forge new agreements that would diminish the deficits.

In addition to a record trade gap in goods with China, the imbalance reached new peaks with Mexico (81.5 billion dollars) and the European Union (169.3 billion dollars). His stated desire to combat the trade shortfall appears to have been the driving force behind most of his major trade shakeups to this point in his presidency: the decisions to walk away from the proposed Trans-Pacific Partnership, to reshape the North American Free Trade Agreement into a new deal that is hardly certain to make it through Congress, and to threaten or implement a slew of tariffs and barriers on products ranging from washing machines from South Korea to cars from Europe and steel from virtually everywhere.

These measures have had the opposite effect and his tax policies have boosted U.S. consumption, with a lot of that spending going to other countries.

The growth in the United States and the higher interest rates that have accompanied it also mean the U.S. dollar has strengthened against its major trading partners, making imports cheaper and exports dearer. This means the month had a ten-year high deficit of $59.8 billion in goods and services of its own. While stock futures registered small gains in the hours after the news, US equities have been down in the three days since.

A deteriorating balance in the country's trade in goods was the chief reason behind the worsening trade picture, as Americans continued to buy foreign-made computers and their accessories but sales of capital goods, including those of civilian aircraft, dropped.

In recent days, Secretary of State Mike Pompeo, among others in the administration, have been visiting farmers and constituents to shore up support in rural areas and political battlegrounds in the Midwest that are particularly sensitive to trade.

"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 stock market plummeted 19 percent last fall, partly on fears that the trade war would inflict severe damage.

Trump rejects conventional economic views of trade, which hold that deficits are not always a negative for the economy as they can allow cheaper goods and services be made available to more people while promoting job creation.

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