Trump pledge undermined as U.S. trade deficit widens

842720_web1_AFP_1EA6OI

The United States had the largest trade deficit of its 243-year history last year, despite President Donald Trump's promise to address the growing gap through "America first" policies that have levied new tariffs against allies and foes.

The trade deficit in December was driven by 1.9 percent drop in exports of goods and services to a 10-month low of 205.1 billion USA dollars. Adjusted for inflation, December was the highest imbalance of trade goods in USA history.

A senior Trump administration official asserted that progress had been made during trade talks over the past two weeks, only to acknowledge that the eventual outcome remains a mystery and that China faced no timetable for responding to the US priorities.

While Trump sees the trade deficit as a sort of economic score card for which country is on top, most economists disagree with this perspective, viewing trade deficits as a sign of neither economic strength nor weakness, but a function of macroeconomic factors like investment flows, fluctuations in the value of currency and relative growth rates.

Trump has made the trade deficit a focus of his economic foreign policy and frequently mentions it when discussing global trade.

In addition, Washington has sought increased Chinese purchases of USA goods, including farm and energy commodities and manufactured products, to reduce a U.S. trade deficit with China that it estimates at more than US$417 billion for 2018. After the latest round of trade talks, the USA president pledged to prolong the temporary truce, extending the deadline for further tariffs.

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.

For years candidate and then President Donald Trump boasted and bragged about what a great deal maker he is, while denigrating, destroying, and tearing up trade deals made by his Republican and Democratic predecessors. US stock futures were marginally lower.

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The dollar is now valued 19 per cent above its 10-year average against the currencies of major U.S. trading partners, according to Federal Reserve data. That typically means Americans buy more from other nations.

Following a spat between the United States and the EU when America lifted tariffs on steel and aluminium, Mr Trump and European Commission President Jean-Claude Juncker past year reached a truce. A trade deficit reducing tariff would have to be much higher, perhaps even exceeding the 25 percent that was supposed to apply two months ago.

"Workers in very Republican counties bore the brunt of the costs of the trade war", the report said, "in part because retaliations disproportionately targeted agricultural sectors, and in part because USA tariffs raised the costs of inputs used by these counties".

Economists said activity from cash-fluid businesses and consumers helped increase the buying of imports while the overvalued dollar weighed on exports.

For the full year, exports rose 6.3 percent to US$2.5 trillion as shipments of goods including crude oil, petroleum products and aircraft engines increased.

President Trump came into office saying America was getting the bad end of deals around the world. If the tariffs led to the creation of 35,000 new manufacturing jobs - equal to all the steel and aluminum jobs lost in the past decade - they would cost US$195,000 per job, the study found.

Economists expect exports to remain weak even if Washington and Beijing strike a trade deal.

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