President Donald Trump’s global trade offensive has posted a resounding failure with government data showing America’s trade deficit in 2018 hitting the highest level in a decade. According to the data, America’s merchandise trade deficit — the main focus of Trump’s tariff wars — surged to its highest level ever in 2018, hitting $891.3 billion, the highest level ever recorded. The figure was 10.4 percent higher than in 2017. Higher too was the imbalance in goods trade with China, Mexico and the European Union — even after Washington slapped tariffs on hundreds of billions in imports from its largest trading partners.
US Trade in Graphics. Credit: AFP
The overall trade deficit with the world, with services factored in, jumped 12.5 percent to $621 billion as both imports and exports rose to their highest levels ever, according to the report. The deficit in 2017 was $552.3 billion. In December alone, the total deficit also vaulted past expectations, surging 18.8 percent and likely weighing on an economy which already was slowing at the close of the year. The bulging deficit numbers come as US and Chinese officials say they are nearing a breakthrough in talks to end their trade war. Beijing is expected to offer to make eye-catching purchases of American agricultural goods to cut the trade deficit and please Trump.
Trump has angrily described trade deficits as a defeat for the United States, and aimed to erase them, but the Commerce Department report was bristling with records as Americans snapped up mobile phones and companies invested in computer equipment in 2018.
“We expect the slowdown in global growth to continue to weigh on exports and industrial production,” Mickey Levy of Berenberg Capital Markets wrote in a note to clients.
“In particular, economic weakness in China and Europe and trade-related uncertainties are dampening trade volumes.” In 2018, however, solid US growth, low unemployment and consumers’ thirst for foreign products drove imports of goods and services up 7.5 percent to a record $3.1 trillion in 2018. Exports also rose, but not enough to chip away at the imbalance. Sales abroad increased 6.3 percent to $2.5 trillion last year, also the highest level ever. And with the country is on its way to becoming a net energy exporter, crude sales abroad more than doubled to $47 billion.
But soybean exports, a crucial crop across vast expanses of the country, fell 18 percent for the year to $18.2 billion amid a Chinese boycott sparked by Trump’s trade war.
American purchases of foreign autos, computers and machinery, and consumer goods, as well as foods and animal feeds, also were the highest ever. Imports of goods ($2.6 trillion) and services ($557.9 billion) reached new all-time highs, the report showed. And even as Washington and Beijing have exchanged punitive tariffs on more than $360 billion in two-way trade, the US deficit with China expanded to an even larger $419.2 billion, a new record. Trump rejects conventional economic views of trade, which hold that deficits are not always a negative for the economy as they can allow cheaper goods and services be made available to more people while promoting job creation. The White House maintains that trade imbalances translate directly into thousands of job losses but while the tariffs protections help some companies, many others have struggled with higher prices and held off on investments amid the trade war. Some have even gone bankrupt or laid off workers as a result of the tariff battles.
While officials have projected optimism in recent weeks, details on a possible deal with China remain scarce. The deficit with the European Union, also in a trade standoff with Washington, also rose to a record $169.3 billion, while the gap with Mexico hit a high of $81.5 billion. 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.
At the same time, the United States recorded surpluses with Britain and with South and Central America. The OECD on Wednesday cut its global growth forecast for 2019 by two tenths to 3.3 percent, citing trade tensions and political uncertainty. Wall Street closed sharply down following the news, with major indices adding to Tuesday’s losses on fears of a slowdown in the global economy and questions on the US-China trade negotiations.
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