The Growing Trade Deficit Strengthens Trump's Hand in Trade Talks With China

Data released Wednesday morning by the Census Bureau shows that America's trade deficit increased by 12.5 percent during 2018, hitting $621 billion by the end of a year ago (and $891 billion if only goods are considered, instead of goods and services combined).

The goods trade deficit with China, which Mr Trump and his officials have sought to address by imposing tariffs on Chinese products worth $250 billion, widened by 11.6 per cent to a record high of $419.2 billion.

The US merchandise trade deficit increased by $83.8 billion, or 10.4 percent, to $891.3 billion in the past year, the Commerce Department said.

There are a few takeaways from this news, including that trade was probably a bigger drag on growth last year than previously forecast.

US President Donald Trump said on Wednesday (March 6) that trade talks with China were moving along well and predicted either a "good deal" or no deal between the world's two largest economies.

But America's dependence on imports appears to have increased after the tariffs that Mr Trump imposed previous year on foreign steel, aluminium and Chinese products.

The United States' goods and services deficit widened by $68.8 billion to $621.0 billion in 2018. The tariffs are a major factor in the ongoing trade war between Washington and Beijing. "I think we need to ask ourselves what the world looks like in which tariffs as blunt instruments are just used as negotiating tools".

The trade gap is growing in large part because the US economy has been strong compared to other major countries.

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Today, the USA economy is healthy, with economic growth relatively robust. The dollar's climb was partly due to a series of rate hikes by the Federal Reserve.

Other data on Wednesday suggested some slowing in the labor market, though the pace of job gains remains more than enough to drive the unemployment rate down.

The strong dollar matters because it has led to near-record deficits in manufactured goods and non-oil goods that are being masked by increases in exports of oil and services, Scott said.

Between 2017 and 2018, USA exports to China dropped by more than $9 billion, while its imports from China rose by more than $34 billion. USA and Chinese officials have recently signalled that they are close to some kind of agreement, although China has only bolstered its commitment to investing in and developing its technology sector and questions about how to enforce any trade rules remain. Moreover, Trump pulled the US out of the longstanding trilateral North American Free Trade Agreement, which came into force in 1994 to unify the US, Canada, and Mexico.

The president has repeatedly argued that the trade deficit is "unsustainable" and classified it as transferring wealth from the U.S.to foreign countries. Economists disagree about whether or not such a deficit is good or bad, since more importing could be an indicator of a healthy economy and consumers with more disposable income. That means Trump's presidency will have seen the United States trade deficit-the main metric by which his judges countries to be winning or losing-grow by more than $100 billion.

Cellphone imports increased $0.6 billion. "When we impose a tariff, it is the domestic consumers and purchasers of imports that bear the full cost of the tariffs", said David Weinstein, an economics professor at Columbia University, who co-authored one of the papers.

Another is that other countries have levied their own retaliatory tariffs on our own products - most famously, red-state goods such as soybeans and bourbon.

(Copyright © 2015. All Rights Reserved.)
 
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