Trump made shrinking the US trade deficit a major goal of his trade war, but it's instead ballooned to $621 billion — the highest since 2008

  • The US trade deficit in goods and services hit $US621 billion in 2018, an increase of $US69 billion from the year before.
  • The increase was driven by a $US218 billion increase in imports and a smaller $US149 billion increase in exports.
  • President Donald Trump has made reducing the trade deficit a key goal of the trade war, despite most economists arguing that the measure does not accurately reflect the US’s economic competitiveness.

The US trade deficit in goods and services increased to $US621 billion in 2018, an increase of $US69 billion from the year prior and the largest deficit since 2008.

While most economists dismiss the trade deficit as a measure of the US economy’s strength, President Donald Trump has made reducing the trade deficit a key benchmark for his yearlong trade war.

But despite the president’s tariffs on steel, aluminium, and Chinese goods, strong US demand for imports and a strong dollar drove the deficit up to its highest level since 2008.

According to the Census Bureau, US imports increased by $US218 billion in 2018, to $US3.12 trillion, while exports grew by just $US149 billion, to $US2.5 trillion.

Looking just at goods – a figure Trump also focuses on – the trade deficit increased by $US83.8 billion, to $US891 billion, a 10.4% jump from 2017. By contrast, the US actually maintained a $US270 billion surplus in the trade of services, up $US15 billion, or 5.9%, from 2017.

The deficit with the main target of Trump’s trade war, China, also grew substantially in 2018. The goods trade deficit with China hit $US419 billion last year, an increase of $US44 billion, according to Census Bureau data. Imports increased by $US34 billion, to $US540 billion, while exports dropped $US10 billion, to $US120 billion.

While Trump’s goal for the trade war was to reduce the trade deficit, particularly in goods, Trump’s tariffs may actually be helping to drive the deficit increase.

US companies rushed to bring in goods that were about to be subject to Trump’s tariffs, driving up imports, while at the same time retaliatory tariffs by countries like China and Mexico led to a significant decrease in some major US exports. Even if China agrees to buy more US goods under a new trade deal, some businesses that changed their supply chains because of the trade war may not go back to buying US goods.

In total, the trade deficit has increased by $US119 billion in the two years since Trump took office after coming in at $US502 billion in 2016.

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