Published: Sat, March 09, 2019
Worldwide | By Angelina Lucas

USA trade gap surged to $US621b in 2018, 10-year high

USA trade gap surged to $US621b in 2018, 10-year high

U.S. President Donald Trump says trade talks with China are progressing well and he expects either a "good deal" or no deal between them.

The department's final 2018 trade report, which was delayed by the government shutdown, showed that the United States bought far more in foreign goods than it sold to customers in Europe, Asia, North America and Africa.

News on Wednesday that our nation's trade deficit in goods hit an all-time record of $891.3 billion past year was widely reported as though it had come as some kind of a surprise.

Although the strengthening dollar and slowing economic growth in some regions contribute to the widening deficits, the record number may also partly be the president's own making- thanks to the trade tension he started with major trading partners including China and the Tax Cuts and Jobs Act passed in 2017.

"The widening trade balance in December is a blow to USA trade policy, Bloomberg economists Tim Mahedy and Carl Riccadonna said". Democrats, if they play this smart, have a chance to make the case Trump is too ignorant and gullible to protect the well-being of US consumers, workers and producers.

Each country can inflict economic pain on the other, but the latest deficit numbers underscore that the potential magnitude of that pain is greater for the export-dependent Chinese economy. Exports rose as well, but only by 6.3 percent, leading to a wider trade gap.

"The assumption now is that trade wars will intensify, and that growth will suffer as a result".

The growth in the USA and the higher interest rates that have accompanied it also mean the U.S. dollar has strengthened against its major trading partners, making imports cheaper and exports dearer.

"The trade deficit is grossly misunderstood".

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"Workers in very Republican counties bore the brunt of the costs of the trade war", the report said, "in part because retaliations disproportionately targeted agricultural sectors, and in part because US tariffs raised the costs of inputs used by these counties".

With the trade gap growing, analysts are concerned it could slow down USA growth this year.

Gary Cohn, director of the National Economic Council for the first 15 months of Trump's administration, had been president and chief operating officer of Goldman Sachs for more than a decade before he agreed to become Trump's top economic adviser.

Trump has repeatedly said that our trade deficit is costing us jobs. Trump has now threatened to end the preferential trade treatment that allows India to export $5.6 billion of goods duty-free to the U.S. He also wants to strip Turkey of its GSP status.

This is the third consecutive year of increasing trade deficits, topping the previous record in 2006.

Trump's supporters point to his talks with China and other U.S. trading partners along with the renegotiation of Nafta as efforts that will help reduce the United States trade deficit.

"The flaw in how the market thinks is that it's less concerned than it should be about the longer-term outlook for free trade and what it could mean for corporate profitability, and whether the current global trading system is going to work as it has in the future", said Ronald Temple, co-head of multi-asset and head of US equity at Lazard Asset Management.

But in 2018, the United States exported fewer goods compared with how much it bought. Simultaneously, U.S. exports fell 1.9 per cent as foreign demand for civilian aircraft and oil products declined.

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