US Trade Deficit Surges In Blow To Trump

The US trade deficit last year hit the highest level in a decade, in a significant setback for President Donald Trump. The gap with China widened to a record US$419.2 billion.

The total US goods deficit surged 10.4 percent to $891.3 billion, the highest level ever recorded.

Meanwhile, the overall trade deficit with the world , with services factored in, jumped 12.5 percent to $621 billion as both imports and exports rose to their highest levels ever, according to the report. The deficit in 2017 was $552.3 billion.

In December alone, the total deficit also vaulted past expectations, surging 18.8 percent and likely weighing on an economy which already was slowing at the close of the year.

The Commerce Department figures undermined a key commitment by Trump, who promised to cut the trade imbalance on the belief that it would bring back overseas factory jobs and bolster the broader US economy.

But America's appetite for imports appears to have increased after the tariffs that Trump imposed last year on foreign steel, aluminium and Chinese products. The greater reliance on Chinese imports probably reflects an acceleration in economic growth last year from Trump's debt-funded tax cuts, which were designed to increase spending by consumers and businesses.

The gap between what the United States sells and what it buys from other countries rose to $59.8 billion in December from $50.3 billion in November, the Commerce Department said. Adjusted for inflation, December was the highest imbalance on trade goods in U.S. history.

And America's merchandise trade deficit - the main focus of Trump's ire - surged to its highest level ever in 2018, as did the imbalance in goods trade with China, Mexico and the European Union - even after Washington slapped tariffs on hundreds of billions in imports from its largest trading partners.

The bulging deficit numbers come as US and Chinese officials say they are nearing a breakthrough in talks to end their trade war. Beijing is expected to offer to make eye-catching purchases of American agricultural goods to cut the trade deficit and please Trump.

Trump has angrily described trade deficits as a defeat for the United States, and aimed to erase them, but the Commerce Department report was bristling with records as Americans snapped up mobile phones and companies invested in computer equipment in 2018.

"We expect the slowdown in global growth to continue to weigh on exports and industrial production," Mickey Levy of Berenberg Capital Markets wrote in a note to clients. "In particular, economic weakness in China and Europe and trade-related uncertainties are dampening trade volumes."

In 2018, however, solid US growth, low unemployment and consumers' thirst for foreign products drove imports of goods and services up 7.5 percent to a record $3.1 trillion in 2018.

Exports also rose, but not enough to chip away at the imbalance. Sales abroad increased 6.3 percent to $2.5 trillion last year, also the highest level ever. (AFP, AP)