US Commerce Department Reports $621 Billion Trade Deficit, Highest in 10 Years

US Commerce Department Reports $621 Billion Trade Deficit, Highest in 10 Years

Despite more than two years of President Trump's "America First" policies, the Commerce Department said Wednesday that the us posted a $891.2 billion merchandise trade deficit last year - the largest in the nation's 243-year history. Adjusted for inflation, December was the highest imbalance on trade goods in United States history. The Wall Street Journal reported last month that farm bankruptcy filings in the Midwest previous year reached levels not seen in a decade as China, among other countries, raised barriers in response to USA trade protectionism. Derek Scissors, resident scholar at American Enterprise Institute calculates the tax cuts could boost the trade deficit by $200 billion.

The trade deficit has deteriorated despite the White House's protectionist trade policy, which President Donald Trump said is needed to shield USA manufacturers from what he says is unfair foreign competition. The good news is that it shows Trump and the trade hawks were right: tariffs need to be much higher to make real progress on the deficit.

The deficit in goods and services during December also hit a near 10-year high of almost 60 billion dollars.

The White House maintains that trade imbalances translate directly into thousands of job losses but while the tariffs protections help some companies, many others have struggled with higher prices and held off on investments amid the trade war.

However, Mr Trump may choose to lift tariffs on European cars and parts after the US Commerce Department produced a report examining whether the imports threaten national security.


The trade gap is growing in large part because the USA economy has been strong compared to other major countries. Beijing's longstanding policy of subsidizing its own businesses and charges that it illicitly obtains USA technology remain key obstacles. This is partly because of the fiscal stimulus Trump has been pumping into the economy, through both his tax cuts and federal spending hikes.

President Trump came into office saying America was getting the bad end of deals around the world.

"When we impose a tariff, it is the domestic consumers and purchasers of imports that bear the full cost of the tariffs", Columbia economics professor David Weinstein wrote in the report.

Between 2017 and 2018, US exports to China dropped by more than $9 billion, while its imports from China rose by more than $34 billion. "We are going to start whittling that down, and as fast as possible", Trump said after his trip to Asia in November 2017.

The US has to print dollars to fund its deficits and, with the US dollar the global currency for foreign exchange transactions and the dominant currency for global central bank reserves, the rest of the world needs to exchange goods and services for US dollars.


'Perhaps Donald Trump will now discover that tweets and bluster alone won't dramatically shrink the trade deficit, ' said Scott Paul, president of the Alliance for American Manufacturing in Washington.

"Trade wars are good, and easy to win", Trump said.

Despite Trump claiming as recently as last weekend during a speech at CPAC that "billions of dollars" are "pouring into our Treasury", the study found that all the cost of the tariffs he has imposed have been paid for by American consumers and companies. "When things are booming we consume more imports".

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.


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