USA trade deficit reached a record high past year

Minnie Murray
March 9, 2019

In the first 11 months of 2018, the United States trade deficit in goods and services with the world increased $52 billion, or about 10%, from the same period in 2017.

"We've been losing, on average, $375 billion a year with China", the president said in February, referring to the 2017 deficit in goods between the United States and China.

The deficit jumped almost 19% in December, pushing the trade imbalance for all of 2018 to widen to a decade-long high of $621bn.

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 US trade gap with China.

Following a spat between the United States and the EU when America lifted tariffs on steel and aluminium, Mr Trump and European Commission President Jean-Claude Juncker previous year reached a truce. Whether you actually should remove services trade in such calculations is questionable.

Would he really prefer that the US economy not be humming? "The costs of the trade war are quite large relative to optimistic estimates of any gains that are likely to be achieved", the report said. After the latest round of trade talks, the U.S. president pledged to prolong the temporary truce, extending the deadline for further tariffs.

"The assumption now is that trade wars will intensify, and that growth will suffer as a result".

The U.S. trade deficit, both globally and specifically with China, hit record highs during 2018.

Mr Trump claims that the U.S. is being "ripped off" by other nations and wants countries to lower their tariffs on USA goods and buy more of them.

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.

Most economists do not consider a trade deficit to be a marker of economic weakness. 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 USA trade balance.

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. The broader goods and services deficit reached $621.0 billion in 2018, an increase of $68.8 billion (12.5 percent).

Investors, who have swung markets based on reports of progress in trade talks, seemed to yawn at the deficit news though, with the S&P 500 down just about 0.2% late Wednesday morning. The US does, however, occupy a unique position, as the dollar is the world's reserve currency and therefore demand remains relatively strong despite the deficit. So there has been less demand for USA exports.

The bulging deficit numbers come as USA and Chinese officials say they are nearing a breakthrough in talks to end their trade war. All told, the USA tariffs covered roughly half of what the US buys from China. On the other hand, imports again rose as American consumers continued to patronize foreign-made goods, especially cheaper products from China.

"We find that the USA tariffs were nearly completely passed through into USA domestic prices, so that the entire incidence of the tariffs fell on domestic consumers and importers up to now, with no impact so far on the prices received by foreign exporters", according to the report.

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