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U.S. trade deficits hit record high following Trump tariff wars

09 March 2019

"We have nearly an $800 billion a year trade deficit with other nations", Trump said in November 2017. While the United States and China are poised to negotiate a deal to end their trade dispute, the proposed deal amounts "much ado about nothing much", as Paul Krugman puts it.

US President Donald Trump, the self-proclaimed Tariff Man, is set to become the $100 Billion Man. He owns it. So how's the trade deficit going?

Apart from that, the Trump administration launched a full-scale trade war against China. After the latest round of trade talks, the U.S. president pledged to prolong the temporary truce, extending the deadline for further tariffs. Beijing is expected to offer to make eye-catching purchases of American agricultural goods to cut the trade deficit and please Trump.

Many economists have pushed back against Trump and his understanding of what a trade deficit means. 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. One final detail, the nation's total trade gap in 2018 came to $621.0 billion, 12.4 percent deeper than $552.3 in 2017 and the deepest 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.

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Vodafone UK decided against using Chinese technology in the higher risk parts of its network more than five years ago, he added. That followed the Canadian government's announcement Friday that the extradition proceeding would be allowed to continue.

Would he really prefer that the USA economy not be humming?

Trump has used tariffs or import taxes more aggressively than any American president since the 1930s. It's just that imports increased too and with these standing at $217.7 billion, the gap is particularly high.

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.

When you get down to it, tariffs and other trade barriers aren't the main influence on national trade deficits or surpluses. In sum, his entire trade policy has failed and in fact been counterproductive.

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Talks could still collapse if a deal cannot be reached on enforcement of these so-called "structural" issues. Trump's team is asking China to give up its right to retaliate should the USA take action unilaterally.

He has picked trade wars the world over, with friends and foes alike.

February's report was, however, in line with other labor market data, including weekly applications for unemployment benefits and manufacturing and services sector surveys that have suggested some moderation in job growth following hefty gains in January. Auto tariffs would provoke retaliatory actions by the European Union, with unpleasant consequences for both sides and the global economy. In retaliation, China put $100 billion in tariffs on USA goods.

This is the third consecutive year of increasing trade deficits, topping the previous record in 2006. That imbalance fell in the aftermath of that year's financial crisis as the United States and other nations plunged into severe recessions.

China has offered to buy a reported US$1.2 trillion in additional American products over the next six years in a deal that reportedly would ease each side's tariffs, usher in changes to Beijing's state-led economic model and include tough new enforcement mechanisms.

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The president has repeatedly argued that the trade deficit is "unsustainable" and classified it as transferring wealth from the foreign countries. There's reason to be skeptical, however, and not only because some of these objectives seem like fantasies. But as trade experts have pointed out, these new rules may be so costly to comply with that they could have the opposite of their intended effect, leading manufacturers to source less rather than more content from North America.

U.S. trade deficits hit record high following Trump tariff wars