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As trade deficit explodes, Trump finds he can’t escape the laws of economics
As trade deficit explodes, Trump finds he can’t escape the laws of economics
WASHINGTON – The Commerce Department said Wednesday that the United States last year posted an $891.2 billion trade deficit in merchandise, the largest in the nation’s 243-year history despite more than two years of President Donald Trump’s “America First” policies.
The results were a sobering reminder that the laws of economics still apply to a president who had promised to supercharge economic growth while simultaneously shrinking the chronic U.S. trade deficit.
Those twin promises proved incompatible, as economists had predicted.
By cutting taxes and taking the lid off government spending, Trump gave the economy a shot of adrenaline. By thinning government regulations, he sought to further spur growth and hiring.
But as these efforts boosted take-home pay, Americans spent more on foreign-made iPhones, Toyotas and Heinekens. And as the U.S. economy surged ahead of Europe’s and Japan’s, four Federal Reserve interest rate hikes lifted the dollar, making American exports more expensive.
“Macroeconomics end up ruling. You can’t wish it away. You can’t tariff it away,” said William Reinsch, a former Commerce Department official now at the Center for Strategic and International Studies.
Tariffs became a key part of Trump’s strategy for shrinking the trade deficit, the difference between the country’s high import bill and its lower export sales. He used the import taxes – on solar panels, washing machines, steel, aluminum and assorted Chinese goods – to force China and other countries into negotiations, with the aim of rebalancing trade flows.
But while negotiations remain underway – with hopes of a deal with China this month – the data released Wednesday showed that significant improvement in the nation’s trade balance remains an ambition rather than an achievement.
Even with China, which has been hit hardest by U.S. tariffs, the trade gap reached a record $419 billion last year.
Administration officials say they are working to overcome decades of poor trade policy……more here
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