The Growing Trade Deficit Strengthens Trump's Hand in Trade Talks With China

Trump promised to shrink the trade deficit. Instead it exploded

Trump dealt blow as US trade deficit jumps

If, as Donald Trump has said, trade wars are good and easy to win, why is the United States losing the wars it initiated and losing so bigly?

He's wrong about trade deficits reflecting weakness. Roughly about as well as making Mexico pay for that big new wall the president is having such trouble building.

That means the 2018 imported $891.2 billion more goods than it exported - a massive deficit, and a massive 10% increase.

The government said Wednesday that the USA trade gap in goods and services reached $621 billion a year ago, its highest total since 2008.

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"That will take time and if the Chinese growth is as soft as most economists believe, it is hard to see how they can ramp up demand for US products very much this year", said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

Reducing the gap is a key plank of Mr Trump's policies. And the U.S. registered the largest trade deficit in goods in its history, growing by 10% to more than $891bn a year ago.

The Commerce Department report comes amid indications that negotiations with China over a sweeping trade agreement may be in their final weeks. That made United States exports more expensive and less competitive. Why has it done that? This is partly because of the fiscal stimulus Trump has been pumping into the economy, through both his tax cuts and federal spending hikes.

"It's more substituting, a reshuffling of trade", Irwin said. It may also be in anticipation of striking a new commercial agreement with the USA that will require China to raise its American purchases. In tandem, those two factors have increased the spending of various US purchasers, from consumers to corporations to government agencies. But such public pledges represent far less than the enforceable commitments to reform such policies that US negotiators are seeking. Computer imports also increased $0.7 billion in December.

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For all the tariff wars and fights with allies, Trump didn't accomplish his own goal, but he did inflict pain on farmers (who now require billions in taxpayer subsidies) and increase costs for American consumers, which includes USA -based businesses that rely on foreign suppliers.

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. And that's the real "problem" in all this. They forecast Trump might now redouble his efforts to impose more and heavier tariffs on trading partners such as Germany and the European Union, for instance. And that, Cohn explained to the president, is a good thing, as folks buying less expensive goods with a stronger dollar have more money to spend on services, which make up more than 80 percent of our gross domestic product. For now, however, given the slow economic growth of the Obama years and the strong growth recently, it sure looks, to those of us living through the moment, like that's what's going on. And when that happens, your trade deficit rises.

During a 2016 campaign speech, candidate Trump referred to the trade deficit as a "politician-made disaster", vowing to change it quickly if elected. And what's going on in the US macroeconomy under Trump is not a bad thing, it's a good thing. Computer imports also increased 0.7 billion USA dollars. 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.

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