Published: Wed, February 07, 2018
Markets | By Noel Gibbs

In Trump's first year, America's trade deficit actually got worse

In Trump's first year, America's trade deficit actually got worse

Official data showed the U.S. deficit in goods and services jumped to $53.1bn in December, an increase of $2.7bn from November, and markedly higher than economists´ consensus forecasts for a deficit of $52bn. We have to go back to 2008 to have a bigger deficit. Solid consumer spending and business investment - assuming they hold up amid the recent stock-market rout - will fuel demand for foreign-made merchandise.

US President Donald Trump's first year in office saw the US trade gap leap to its highest level in seven years due to record imports.

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The president has to decided in the next couple of months whether he will act on the steel and aluminum case reports on his desk that argue for higher tariffs based on national security concerns, a move the US has rarely used in the past because of risks that USA exports could pay the price in retaliation. The goods deficit with China rose 8.1 percent to hit a record $375.2 billion in 2017, while the trade gap with Mexico rose to $71.1 billion. To achieve this, he has threatened to cancel trade agreements such as the TPP (Trans-Pacitic Partnership) with Pacific Rim countries and the North American Free Trade Agreement (NAFTA) with Canada and Mexico.

Trump has already placed tariffs on solar panels and washing machines in a shot across the bow at China and others, and he is expected to make a decision on imports of steel and aluminum in the next few months.

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The global trade balance deteriorated further in December as import growth continued to exceed that of exports. Tax reform, which is strengthening the economy already, may push the trade deficit even higher. In December, a strong increase in imports possibly resulted from some suppliers rushing goods into the country at year end, fearing import tariffs in 2018.

For the time being though, it should not provide reason to worry because growing imports went along with rising United States exports previous year.

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