USA trade deficit jumps to 10-year high in 2018

Chinese container ship

Chinese container ship

America's trade deficit with the world jumped 12.5 per cent to $621 billion, the Commerce Department reported, as both imports and exports rose to the highest levels ever.

"But now, when you're getting close to a victory, to relent at the eleventh hour, without achieving meaningful, enforceable, and verifiable structural reform to China's trade policies would be an abject failure of the president's China policies and people will shrug their shoulders and say what the heck did he begin this for if he won't complete it", Schumer said.

President Donald Trump has made cutting the gap between the two countries a top priority of his administration. Consumer goods imports jumped 2.4 billion USA dollars, boosted by a 0.7 billion US dollars increase in imports of household and kitchen appliances.

The deficit, which is the difference between the goods and services the USA buys from other countries and those it sells to them, rose to a seasonally adjusted $59.8 billion in December - an increase of nearly 19 percent. That in turn leads to a stronger dollar, which in itself helps increase the trade deficit by lowering the real cost of imports and increasing the local-currency cost of American goods in overseas markets.

But the trade gap on goods surged to record highs past year with China ($419.2bn), Mexico ($81.5bn) and the European Union ($169.3bn). President Donald Trump has said that one of the main reasons he had put steep tariffs in place was to combat the trade deficit.

The Fed said slowing global growth and the government shutdown weighed on the U.S. economy at the start of the year but that it continued to grow. That imbalance fell in the aftermath of that year's financial crisis as the United States and other nations plunged into severe recessions.

Many economists have pushed back against Trump and his understanding of what a trade deficit means.

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President Trump's America First policies are not having their intended effect.

'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.

EU Trade Commissioner Cecilia Malmstrom is in Washington this week and due to meet later Wednesday with US Trade Representative Robert Lighthizer as they prepare for formal negotiations. Capital goods imports increased 2.7 billion USA dollars, with imports of computer accessories rising 0.7 billion US dollars.

Weinstein said the President appears to be relying on a 2018 analysis of data from the 1990s, when the United States represented a larger share of the global economy and enjoyed more leverage over exporters in other countries.

A second study by four economists from the University of California, Los Angeles; Yale University, the University of California, Berkeley; and Columbia University reached the same conclusion. The retaliatory tariffs Trump provoked from China also hit major U.S. agricultural exports such as soybeans: shipments of that item fell US$4 billion previous year.

Nor have the tariffs provided the negotiating leverage that Trump sought.

Globally, the trade deficit jumped from $796 billion to $870 billion between 2017 and 2018, an increase of $74 billion.

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