USA commerce department says trade deficit hit 10-year high in 2018
09 March, 2019, 01:22 | Author: Donnie King
The U.S. goods trade deficit with China hit a record $419.2 billion in 2018. The irony is that those policies likely contributed to the deficit.
Trump entered office insisting that decades of trade gaps had crushed the US economy and that he would forge new agreements that would diminish the deficits. And despite Trump's insistence that the U.S. Treasury has taken in billions of dollars in tariffs from China, experts say the weight of the tariffs has been borne by U.S. businesses and consumers, including many GOP voters.
Cellphone imports increased 0.6 billion USA dollars. And instead of pulling back on support for technology development, Premier Li Keqiang, in his report to the national legislature on 2019 government goals, promised even more such support.
Trump also slapped tariffs, which are a kind of tax on imported goods, on steel and aluminum imports, a move that led to retaliation from some US trading partners.
Trump often misrepresents the trade deficit. He has frequently labeled it an outright economic loss. A surfeit in resources trade was not able to prohibit the total deficit for 2018 from escalating almost 19 percent in December to a decade-long high of $621bn.
Lawrence Summers, a Harvard economist and former chairman of President Barack Obama's National Economic Council, told The Times that "the trade deficit is a awful metric for judging economic policy".
"What is certain is that in opening up the financial sector, China and the United States can fully agree on each other", Guo Shuqing, the chairman of China's banking regulator, told reporters Tuesday. And it's not necessarily a cause for concern. Trump, who has dubbed himself "the tariff man", pledged on both the campaign trail and as president to reduce the deficit by shutting out more unfairly traded imports and renegotiating free trade agreements. But such public pledges represent far less than the enforceable commitments to reform such policies that USA negotiators are seeking.
"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.
Trump's supporters point to his talks with China and other USA trading partners along with the renegotiation of Nafta as efforts that will help reduce the United States trade deficit.
The jump in the so-called real goods trade deficit suggests that the drag from trade on fourth-quarter gross domestic product growth was probably bigger than the 0.22 percentage point estimated by the government last week. The overall trade deficit surged 12.5 percent to $621.0 billion in 2018, the largest since 2008.
Businesses likely stocked up on imports in anticipation of further duties on Chinese goods, which ironically contributed to the deterioration in the trade deficit previous year, Reuters noted. By contrast, in 2018, after years of economic expansion, the gap in goods had swollen to a record $878.7 billion. A new economic downturn would mean the trade deficit is reduced, but that's hardly an ideal situation.
Christine McDaniel of the Mercatus Center at George Mason University says that should come as no surprise, given that the USA runs a low saving rate and a very high consumption rate compared to other large economies like China.
It appears that the expansion of the trade gap is accelerating. Sales overseas increased 6.3% to $2.5-trillion in 2018, also the highest level.
Researchers at the New York Federal Reserve examined this issue a year ago.
"The chances of a deal with China this month look a bit weaker now, while more trade conflict with Europe seems increasingly likely", said Chris Beauchamp, chief market analyst at online trading firm IG. The recent widening in the deficit has been driven in part by weakening exports, according to Daniel Silver, an economist at JPMorgan.
The White House initially charged a 25 percent tax on $50 billion of Chinese imports in June. It followed in September with 10 percent duties on an additional $200 billion.
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