Free Trade

America's Trade Deficit Hit a New Record High at the End of 2018

That's just fine, unless you happen to be a president who promised to reduce it.

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President Donald Trump's attempt at reducing America's trade deficit with foreign countries seems to have done exactly the opposite.

Data released Wednesday morning by the Census Bureau shows that America's trade deficit increased by 12.5 percent during 2018, hitting $621 billion by the end of last year (and $891 billion if only goods are considered, instead of goods and services combined). That increase occurred despite the Trump administration's decision to impose several rounds of new tariffs last year on imported steel, aluminum, and thousands of Chinese-made goods, all with the intention of reducing how much America imports.

Source: U.S. Census Bureau https://www.census.gov/foreign-trade/statistics/highlights/annual.html

Not only did the trade deficit—which measures the gap between the total value of all imports versus the value of all exports—widen during 2018, America actually imported a record amount of goods last year, according to the Census data. That happened despite the new barriers to trade raised by the Trump administration.

That's good news, because high levels of imports are a sign of a healthy economy. By the same logic, it's no surprise that America's trade deficit shrunk dramatically during the recession that followed the 2008 economic crisis.

But a larger trade deficit runs directly counter to the narrative Trump has been pushing ever since he started campaigning for the presidency. In Trump's zero-sum view of trade, a deficit indicates that America is somehow losing or being taken advantage of—you know, in the same way that a grocery store is taking advantage of you by selling you food. Most economists predicted that Trump's tariffs would not reduce the trade deficit, and it appears those predictions were accurate.

The tariffs may have failed their primary policy aims, but they have had other consequences—mostly negative ones. American consumers and businesses have not stopped buying foreign goods, as the new data indicates, but they are paying higher prices for the privledge of doing so. Steel- and aluminum-consuming businesses have been hit particularly hard by the higher prices created by tariffs. As I noted yesterday, a new study on the economic costs of the tariffs shows they they are costing $1.4 billion every month—that's above and beyond the direct costs created by the tariffs, which have transferred more than $12 billion from American consumers to the U.S. Treasury in the form of higher taxes.

Ironically, as NPR's Jim Zarroli writes, the 2017 tax cuts championed by Trump likely had more to do with the growing trade deficit than the tariffs did. Put more money in people's wallets, and they are going to spend it. Equally ironic is the fact that Wednesday's data shows America's economy to be in strong shape. But as trade attorney Scott Lincicome notes, Trump is unable to claim credit for that good news because he's spent so much effort promising the opposite.

Still, the biggest takeaway from the new trade data is not that the tariffs predictably failed to do what Trump thought they would; it's that the U.S. economy is powered by the individual decisions of millions of people and businesses, and that entity is far too complex and powerful to be controlled by the White House.

NEXT: The Most Politically Intolerant Americans Tend To Be Urban, Highly Educated Whites, Survey Shows

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  1. “That’s good news, because high levels of imports are a sign of a healthy economy”

    So what the fuck are you bitching about.

    If your enemy is making a mistake, let him.

  2. >>>entity is far too complex and powerful to be controlled by the White House

    those jerks in Congress remind us every 2 minutes they’re the controllers

  3. the U.S. economy is powered by the individual decisions of millions of people and businesses, and that entity is far too complex and powerful to be controlled by the White House.

    Right. That’s why we need the Federal Reserve to control it.

  4. which measures the gap between the total value of all imports versus the value of all exports

    Bullshit. Your misdefinition shows you should not be discussing this any more than Trump or John or lc1789 or any other economic illiterate.

    The “trade deficit” is an accounting fiction which purposely leaves out some exports to bias the issue. Trade dollars out HAVE TO match trade dollars in, or someone is burning money to light cigars. China is not going to accept greenbacks in return for goods and services unless they can spend them, and whether they directly buy American exports or buy Singapore or Australian or Saudi products who in turn buy American products makes no difference. The dollars sent out to buy imports have to match dollars sent in to sell exports.

    1. The numbers have to balance – but not nec in trade accounts. It can balance in current account (basically services) or capital account (turning debt-currency into some form of investment)

      1. Yes, what I said, with more detail for the wonks. The problem is flat declaring it is the difference between imports and exports, which is exactly what Trump and the other trade warriors think it is, and that is wrong wrong wrong.

  5. Maybe Trump is not a Russian agent, but a Chinese one? I was thinking that AOC must be a Chinese agent, because demonizing energy use would transfer manufacturing from the US to China, and of course they would fund the massive investment required for the GND, and when it’s time for payback, we are their slaves for decades. But yeah, Trump and AOC might be Chinese agents.

  6. The author left out the commonly accepted explanation for this. Businesses have increased their inventories of Chinese products out of concern that future tariffs could rise even higher. America’s warehouses are now bursting at the seams because of this.

    Links over 50 characters are not allowed here. Ridiculous. So you’ll have to google this article title:

    Trump’s China tariffs spur U.S. firms to boost imports – and GDP – at end of 2018

  7. For sixty-years I’ve been reading how the trade deficit was going to bring wrack to this country.
    So far, all I’ve seen is “the business cycle”, and the raising of the standard-of-living of almost all Americans through international trade, and an increased investment in America by overseas investors as they need a safe place to keep the money they’ve accumulated by selling us stuff.
    BTW, isn’t the term for a country that sells more than it imports FTMP “Colony”?

  8. American companies with the connections are now end-running the tariffs. Chinese steel etc is shipped to SE Asia (Malasia, Thailand etc) to be manufactured / assembled into components / units that are then imported to the US as (you guessed it) Malay, Thai etc goods that are not penalized.

    The net result is that relatively high-valued manufacturing is moving from the US to SE Asia (thanks Donald!). And when the American factories go out of business, they’ll be gone for good. Even after the tariffs are relaxed, the work will not come back unless some other country is stupid enough to kick it out.

    1. LMAO!!! So !FROM! China -> SE Asia -> US is offshoring US Manufacturing??? You must think that China is the U.S.

  9. Start working at home with Google! It’s by-far the best job I’ve had. Last Wednesday I got a brand new BMW since getting a check for $6474 this – 4 weeks past. I began this 8-months ago and immediately was bringing home at least $77 per hour. I work through this link, go to tech tab for work detail.. http://www.Home.jobs89.com

  10. The REAL question should be – did the Revenue from Tariffs cover or exceed the increase in trade deficit.

    Of Course; We will all just dismiss the fact that our Trade Deficit rose from practically $0B to well over $66B after NAFTA was passed in 1993 and just BLAME it all on Trumps Tariffs (Barely given a year to see the results of).

    I still support Trump’s Tariffs because one thing we DO know is that maintain the status-quo of Pre-Recession habits led to the exact same problem of foreign borrowing, borrowing, and borrowing with no end in sight.

    Actually the Trade Deficit went viral after 1996 to 2006; So I’d give the Tarrif plan at least 3-years to materialize before throwing out judgements. Not to also point out that Deficit went down in May – AFTER the original Tariffs went into place.

  11. Start working at home with Google! It’s by-far the best job I’ve had. Last Wednesday I got a brand new BMW since getting a check for $6474 this – 4 weeks past. I began this 8-months ago and immediately was bringing home at least $77 per hour. I work through this link, go to tech tab for work detail.
    >>>>>>>>>> http://www.GeoSalary.com

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