- The US goods trade deficit increased to $US77.2 billion in the month of October – a record high.
- President Donald Trump has made reducing the trade deficit a key goal of his policies.
- But experts say Trump’s tariffs can’t reverse an underlying economic trust about the US.
President Donald Trump’s favourite trade war report card hit its highest level in history last month.
According to the Census Bureau, the US goods trade deficit hit a record high of $US77.2 billion in October, up from $US76.3 billion the month before.
While economists dismiss the deficit as an inaccurate measure of the US’s economic competitiveness, Trump has focused on the number and has made bringing down the deficit one of the key goals of his trade policy.
The reason for October’s bump was a continuation of the steady increase in imports – up 0.1 percentage points from September – as America’s appetite for foreign goods remained strong. Exports declined by 0.6 points month-over-month. This was the fifth-straight month the deficit has widened.
Jake McRobie, a US economist at Oxford Economics, laid out why the deficit is unlikely to head in Trump’s desired direction anytime soon.
“Moderating global momentum and protectionist trade policies will keep weighing on exports in the near-term, as solid domestic demand and supply constraints keep imports growth healthy, further widening the deficit,” McRobie said.
A strong US economy means Americans still want to buy overseas goods, while a slowing global economy and Trump’s tariffs are slowing US exports. Combine the two, and you’ve got a recipe for a long-term trend of expanding trade deficits, according to Ian Shepherdson at Pantheon Macroeconomics.
“Tariffs can’t fix the fundamental problem that the US doesn’t save, net, so it has to run a deficit,” he said in a note to clients. “Fiscal stimulus this year has raised the trend in the deficit.”
The news is unlikely to please Trump in the run up to the G20 summit in Argentina over the weekend. The president is scheduled to meet with a roster of world leaders, including Chinese President Xi Jinping.
The two sides are expected to try and hash out a deal to end the US-China trade war and eliminate tariffs on roughly $US360 billion worth of goods going between the two countries. But Trump has recently been making a lot more noise about tariffs – ranging from cars to more Chinese goods – so prospects for the meeting are dim.