Despite Trump’s “America First” discourse, an increase in imports fulled by lower taxes and a slowing down of exports based on a strong dollar and trade tariffs, especially with China, have affected the country’s commercial balance.
The Commerce Department said Wednesday that a 12.4 percent increase in the goods deficit in December had contributed to the record US$891.3 billion goods trade shortfall last year. The overall trade deficit surged 12.5 percent in 2018, the largest since 2008.
“A trade deficit usually reflects that the productive structure of such country is weakening against other nations,” Nicolas Oliva, economist from the Latin American Strategic Center of Geopolitics (Celag) told teleSUR, adding that the U.S. is probably “the only country in the world that can sustain such growing deficit due to the fact that it owns the dollar.”
The White House argues that reducing the trade deficit would boost annual economic growth to its goal of three percent on a sustainable basis. However, the US$1.5 trillion tax cut package didn’t help this goal, since it jolted both consumer and business spending, reaching a record high US$2.6 trillion in 2018 in imported goods.
Oliva also said that in the case of the U.S. its relation to China and other major international players is “key” to understand the effects on the commercial balance. According to the U.S. Department of Commerce, the goods trade deficit with China increased 11.6 percent to an all-time high of US$419.2 billion in 2018. While it also had record imports from 60 countries in 2018, including Mexico and Germany.
“The widening trade balance in December is a blow to U.S. trade policy. Analysts should expect higher deficits in the months ahead as global growth slows, and the economic expansion in the U.S. continues at an above-trend pace,” Bloomberg economists Tim Mahedy and Carl Riccadonna conclude.