The US goods trade deficit surged to a record high in 2018 as strong domestic demand fueled by lower taxes pulled in imports, despite the Trump administration’s “America First” policies, including tariffs, aimed at shrinking the trade gap, Reuters reports.
The US Commerce Department was quoted as saying on Wednesday that a 12.4 percent jump in the goods deficit in December had contributed to a record US$891.3 billion merchandise trade shortfall for the full year.
The overall trade deficit, which includes services, surged 12.5 percent to US$621 billion in 2018, the largest since 2008.
The government sought to stimulate the economy with a US$1.5 trillion tax cut package, which enhanced both consumer and business spending, helping to lift imported goods to a record US$2.6 trillion in 2018.
The US last year imposed tariffs on US$250 billion worth of goods imported from China, with Beijing hitting back with duties on US$110 billion worth of American products, including soybeans and other commodities.
Trump has delayed tariffs on US$200 billion worth of Chinese imports as negotiations to resolve the eight-month trade war continue.
Businesses likely stocked up on imports in anticipation of further duties on Chinese goods, which ironically contributed to the deterioration in the trade deficit last year, Reuters noted.
The goods trade deficit with China increased 11.6 percent to an all-time high of US$419.2 billion in 2018. The US, which also slapped duties on imported steel, aluminum, solar panels and washing machines, had record imports from 60 countries in 2018, led by China, Mexico and Germany.
“Perhaps Donald Trump will now discover that tweets and bluster alone won’t dramatically shrink the trade deficit,” Reuters quoted Scott Paul, president of the Alliance for American Manufacturing in Washington, as saying.
“The administration’s fiscal policies have helped to boost the trade deficit.”
While goods exports hit a record US$1.7 trillion in 2018, they declined in the last three months of the year, weighed by the US-China trade dispute, slowing global demand and a strong dollar.
A 1.9 percent drop in exports of goods and services drove the trade deficit in December to US$59.8 billion, the largest since October 2008. Imports of goods and services increased 2.1 percent to US$264.9 billion in December.
When adjusted for inflation, the goods trade deficit surged US$10 billion to a record US$91.6 billion in December.
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