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

Trump dealt blow as US trade deficit jumps

-China trade relationship can work in Trump's favor: there are simply far more Chinese goods coming into the hit with tariffs than there are American goods flowing into China that can be hit with retaliatory charges. The December gap jumped from the prior month to US$59.8 billion, also a 10-year high and wider than the median estimate of economists.

In December alone, the imbalance in trade, which represents the difference between the values of imported goods and services and the value of the country's sales overseas, jumped almost 19 percent to a seasonally adjusted $59.8 billion.

While Trump frequently cites the deficit as evidence of the failure of his predecessors' trade policies - even though most economists don't dwell on the indicator - the gap has increased by US$119 billion during his two years as president. Although the United States has imposed tariffs of 10 to 25 percent on $250 billion in imports from China (about half of total USA imports from that country), China has played its "ace-in-the-hole" by allowing it's currency to fall by roughly 10 percent against the dollar.

Trump appears to be on the verge of doubling down on his tariff strategy, with reports that the US Commerce Department has, conveniently, determined that imports of European autos represent a threat to US national security, the same pretext the administration used to slap tariffs on Canada's aluminium exports.

"The widening trade balance in December is a blow to U.S. trade policy, Bloomberg economists Tim Mahedy and Carl Riccadonna said". Those lower costs have indeed contributed to the loss of USA factories to foreign countries and devastated vast swaths of the industrial Midwest.

A trade deficit occurs when a nation's imports exceed its exports. "The administration's fiscal policies have helped to boost the trade deficit". The trade gap for the year therefore reached $621 billion (£472.5 billion). 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. The also pushing China to open its markets in services and other sectors.

He's wrong about trade deficits reflecting weakness.

The US is now locked in a trade battle with China over what it claims are unfair trade practices, resulting in tit-for-tat tariff increases on each others' goods.

This took place at the same time as growth in the rest of the world in 2018 slowed markedly, which led to an increase in the U.S. trade gap. 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.

The Fed said slowing global growth and the government shutdown weighed on the United States economy at the start of the year but that it continued to grow.

A ship loaded with containers is pictured at Yusen Terminals (YTI) on Terminal Island at the Port of Los Angeles in Los Angeles, California, U.S., January 30, 2019.

In its relationship with China, a bigger problem for the US economy than trade deficits is the widespread suspicion that Beijing steals intellectual property and requires American companies that operate there to turn over technology secrets - two issues at the heart of the administration's negotiations with Beijing. Tariffs and counter-tariffs make goods more expensive. The goods shortfall topped the 2006 record of US$838.3 billion, set as the housing bubble was peaking, and marked the third consecutive year of rising deficits.

There were also notable declines in US shipments to China of frozen fish and American-made cars, among the other products hit by higher tariffs.

"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. There is a strong likelihood Trump might walk away from the ongoing trade talks with China.

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