U.S. trade gap climbs to 9-year high in ’17; imports reach record
WASHINGTON — The U.S. trade deficit in 2017 hit its highest level in nine years, defying President Donald Trump’s efforts to bring more balance to America’s trade relationships.
The Commerce Department said Tuesday that the trade gap in goods and services rose to $566 billion last year, the highest since it reached $708.7 billion in 2008. Imports set a record at about $2.9 trillion, swamping exports of about $2.3 trillion.
The December trade deficit in goods and services rose to $53.1 billion, up from $50.4 billion in November and the highest since October 2008.
Trump sees trade deficits as a sign of economic weakness and largely the result of unfair competition by America’s trading partners. Most economists see them largely as the result of bigger economic forces: Americans spend more than they produce, and imports fill the gap.
In his first State of the Union address, Trump last week promised to “fix bad trade deals and negotiate new ones.” The president
recently placed tariffs on imported solar panels and washing machines, sparking concern the U.S. may prompt trade wars.
The goods deficit with China hit a record $375.2 billion in 2017, and the goods gap with Mexico rose to $71.1 billion.
Trump has repeatedly complained about America’s trade deficit with China, expressing his disappointment with the growing shortfall in a recent phone call with President Xi Jinping. The U.S. president has threatened a host of actions to constrain China, including tariffs on imports of steel and aluminum. The Trump administration is also weighing whether to impose trade sanctions on China for the theft of U.S. intellectual property.
“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 economic behavior.
“It’s very easy to trash someone with a tweet,” Morici said, referring to Trump’s frequent use of Twitter. “It’s much harder to stand up to someone your own size.”
Morici said the hefty new tariffs on Chinese solar panels and South Korean washing machines were “rifle-shot” actions that would not make a dent in the overall trade deficit.
Some economists say it will be tough to reverse the trade imbalance with China without measures that change the balance between investment and saving in each country. Republican-backed tax cuts passed late last year could exacerbate the trade shortfall by boosting the dollar, making U.S. exports more expensive, and by stoking domestic demand, which would also spur imports.
The administration is currently renegotiating the North American Free Trade Agreement with Mexico and Canada, and Trump has repeatedly threatened to withdraw from the pact if the ongoing negotiations don’t go the U.S.’ way — a threat that he repeated Monday in a speech in Cincinnati.
Exports in December rose 1.8 percent from the previous month, to $203.4 billion, led by record shipments of capital goods and by gains in industrial supplies and materials. Imports advanced 2.5 percent to $256.5 billion, helped by record U.S. purchases of consumer goods, capital goods and food products.
The monthly figures add to details for the fourth quarter, when trade was a substantial drag on the economy, and show how a widening trade deficit could mitigate any gains in the pace of economic expansion in 2018. Net exports subtracted 1.13 percentage points from gross domestic product growth, which registered an annualized rate of 2.6 percent in the October-December period.