Record US deficit in traded goods
7 March 2019
US President Donald Trump has made a reduction of the trade deficit a cornerstone of his economic policies, insisting it drains wealth from the American economy and results from concessions made to rivals by previous administrations.
But data released by the Commerce Department yesterday show that the deficit in traded goods hit an all-time high of $891.3 billion last year, an increase of 10 percent. After tourism, education and banking were taken into account, it was still $621 billion, the highest level in ten years.
The deficit with China, the major target of Trump’s trade war measures, reached a new record, as did the deficit with Mexico. The goods deficit with China widened by $44 billion last year to reach $419 billion, almost half the total.
Overall, US imports rose by 7.5 percent last year, driven by increased spending on consumer goods, industrial supplies and capital goods. Exports rose as well, but only by 6.3 percent, leading to a wider trade gap.
It appears that the expansion of the trade gap is accelerating. It increased by 18.8 percent in December to almost $60 billion, larger than economists’ predictions, as exports fell by 1.9 percent and imports increased by 2.1 percent.
One of the main impacts on the US of the Trump trade war measures against China is in the area of agriculture. As a result of retaliatory measures imposed by Beijing, China’s purchases of American soybeans, wheat and sorghum fell by almost $10 billion last year.
The Wall Street Journal (WSJ) reported that, as a result of a fall in prices, due to China shifting its source of supplies, US producers had held on to their product in the hope of a better price. But they had now been forced to sell at a loss. The WSJ cited one…