The U.S. goods and services deficit jumped 12.1 percent to $566 billion in 2017, its highest level since 2008, according to the most recent data from the Commerce Department’s Bureau of Economic Analysis (BEA).
The U.S. trade deficit – the amount by which the country’s goods and services imports exceeds its exports – widened 12.1 percent to $566 billion in 2017, its highest level since 2008, according to the most recent data from the Commerce Department’s Bureau of Economic Analysis (BEA).
In December alone, the goods and services deficit rose 5.4 percent to $53.1 billion compared with the previous month. December exports stood at $203.4 billion, up $3.5 billion from November, but that growth was more than offset by a $6.2 billion increase in imports to $256.5 billion for the month.
For the full year, total U.S. exports grew 5.5 percent to $2.33 trillion, while imports jumped 6.7 percent to a record $2.9 trillion, both of which were the largest increases since 2011, according to an analysis from Bloomberg Markets.
Prior to his election, U.S. President Donald Trump pledged to eliminate the nation’s trade deficit within two years as a means of increasing American manufacturing, improving the economy and reducing outsourcing of jobs to countries with lower wage standards.
The idea was to withdraw from or renegotiate free trade agreements like the Trans-Pacific Partnership (TPP) and North American Free Trade Agreement (NAFTA), which Trump deemed as “bad deals” for the United States, in an effort to create a trade surplus, wherein the country exports more goods and services than it imports.
“This is not some natural disaster, it’s a political and politician-made disaster,” Trump said in a June 2016 speech in Monessen, Penn. “Very simple. And it can be corrected and we can correct it fast when we have people with the right thinking.”
“We want to eliminate the trade deficit within a year or two,” White House trade advisor Peter Navarro said one month before the November 2016 election. “That’s very doable with good deals.”
Just over a year into his presidency, however, the Trump administration appears to be backing away from that two-year timeline for eliminating the trade deficit.
According to multiple media reports, Commerce Secretary Wilbur Ross said in a statement after the release of the BEA data, “The trade deficit ultimately will be reduced through a combination of enforcement actions, renegotiation of some existing agreements and negotiation of new agreements. Strenuous effort is underway, but it is not practical to set an exact deadline.”
At this point, it’s fairly obvious that Trump hasn’t lived up to his campaign promise of eliminating the U.S. trade deficit by any stretch of the imagination, and in fact, the deficit has widened under his watch. In fact, many economists argue that Trump’s policies, including the recently signed Tax and Jobs Act, have contributed to the increasing trade deficit.
But this once again begs the question: is eliminating the trade deficit even possible given the evolution of the global economy and America’s current role within it, and if so, is it a goal that’s actually worth pursuing?
Following Trump’s comments leading up to the election, the consensus from U.S. economists and trade analysts seemed to be that running a deficit of goods and services isn’t necessarily a bad thing.
To put it simply, the U.S. has over the years become a “consumer” economy, i.e. one in which we consume more goods and services than we can produce. When the economy is growing, as it has under the Trump administration, consumers spend more, and a good deal of that spending naturally goes to imports since there aren’t enough domestically produced goods and services to satisfy consumer demand.
Growth in U.S. gross domestic product (GDP) – the broadest measure of a nation’s economic health – rose to an annual rate of 2.3 percent in 2017 compared with 1.5 percent in 2016, despite getting off to a relatively slow start.
In addition, a strong U.S. dollar makes American exports more expensive – and less desirable – abroad, while simultaneously increasing spending power for consumers, especially when it comes to imports from countries with weaker currencies. And although the dollar actually weakened by 7 percent relative to its major trading partners over the course of 2017 (according to a report from ABC News), this was not enough to offset rising consumer spending.
To be fair, the Trump administration is in the midst of discussions to renegotiate NAFTA and the U.S.-Korea Free Trade Agreement (KORUS), and the president himself recently opened the door to the idea of rejoining the TPP, assuming the U.S. can secure what he feels are more favorable terms. If the administration is successful in its attempts to renegotiate these deals and others like them, it is still possible the deficit may be reduced within Trump’s time in office.
But again, the question then becomes whether that “strenuous effort,” as Ross put it, is ultimately worthwhile for the U.S. economy and the American consumer.
U.S. trade deficit widens to 9-year high in 2017 despite Trump rhetoric
