U.S. trade deficit rises to highest level since 2008, fanning criticism of Trump

Don Lee, Los Angeles Times on

Published in Business News

WASHINGTON -- The U.S. trade deficit widened last year to the highest level since 2008, fueling criticism that President Trump has done little to make good on his promise to curb America's long-standing imbalance with the rest of the world, particularly China.

Last year's trade shortfall in goods and services totaled $566 billion, an increase of 12 percent from 2016, the Commerce Department said Tuesday. The deficit had changed little in the prior two years.

The larger-than-expected trade imbalance reflected an expanding American economy. Growing investment and spending in the U.S. mean businesses and consumers bought more foreign goods, from crude oil to computers to cellphones.

But the other side of the coin is that U.S. exports, while also increasing in December and all of 2017 -- with more shipments of things like oil, industrial machinery and aircraft engines--still did not grow as much as imports. Nor did U.S. exports of services, such as licensing fees and management services, rise enough to make up for the shortfall in the exchange of merchandise.

The result is a net trade deficit that could lower the calculation of U.S. economic growth in last year's fourth quarter. A weakening of the dollar and stronger economies abroad should help lift American exports this year, but imports also are likely to keep expanding.

For Trump, the double-digit percentage jump in the trade deficit in his first year in office carries particular political significance. Unlike his predecessors, he has put extraordinary emphasis on the trade balance numbers, regarding them as a key scorecard of U.S. economic health and American commercial relations with individual countries. Most economists don't share that view.


As a candidate and as president, Trump has promised to upend the way America does business with the world to halt and reverse trade deficits. And with that in mind, his administration has undertaken to renegotiate the North American Free Trade Agreement and the U.S. trade pact with South Korea.

But the new trade data reported Tuesday raised hackles of long-time critics of Washington's trade policy, and provided fresh ammunition to apply pressure on Trump to follow through on his talk to get tough on trade, especially with China.

While U.S. trade deficits rose with most every region and country in the world, China accounted for nearly half of the $810-billion merchandise trade gap with the world last year. The U.S. bought $375 billion more of goods from China than the other way around.

"The numbers tell the story. He's been in office a year now and the trade deficit is up," said Peter Morici, a former chief economist at the U.S. International Trade Commission who has long advocated for an aggressive response to Chinese mercantilist economic behavior.


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