Trump pledge undermined as U.S. trade deficit widens

Senior White House economic adviser Larry Kudlow speaks during a briefing at the White House in Washington

Senior White House economic adviser Larry Kudlow speaks during a briefing at the White House in Washington

David Dollar, economist, expert on China and senior fellow at the China Center at the Brookings Institute, told students and faculty the world is nervous about rising protectionism in the US and America's imposition of trade tariffs on China during a lecture February 26 in Mandeville Hall.

President Donald Trump has made cutting the gap between the two countries a top priority of his administration. "It's not an accident". "When we impose a tariff, it is the domestic consumers and purchasers of imports that bear the full cost of the tariffs", said David Weinstein, an economics professor at Columbia University, who co-authored one of the papers.

The main long-term driver of persistent trade deficits since 1975 has been the gap between the US's low savings rate and its attractiveness as an investment destination, fueled partly by the dollar's role as the world's reserve currency.

President Trump's goal of reducing the trade deficit has been undercut, in part, by the stimulative effect of his biggest policy achievement to date, tax cuts, paired with a continued rise in federal government spending. The goods shortfall topped the 2006 record of US$838.3 billion, set as the housing bubble was peaking, and marked the third consecutive year of rising deficits. Economists from the University of California, Los Angeles; Yale University; and the University of California, Berkeley released the latest draft of an economic study this week that showed that Americans footed the entire tariff bill in 2018.

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In 2016, it was $502 billion.

But, Trump's one and-a-half billion-dollar tax cut and the trade war he escalated past year have also played a part. They also point to his renegotiation of Nafta as something that will help reduce the United States trade deficit in the long run.

The Trump administration is remaining optimistic they will be able to negotiate a new trade deal with China.

The tariffs he threatened and then imposed on Chinese imports caused a rush by importers to get ahead of the new duties that fuelled an increase in incoming traffic at West Coast ports previous year.

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That study also found that workers in Republican-leaning counties, especially in farm states, suffered the greatest losses from tariffs that USA trading partners imposed in retaliation for the president's actions.

The goods trade deficit with China increased 11.6 percent to an all-time high of $419.2 billion in 2018. They also were causing the diversion of $165 billion a year in trade leading to significant costs for companies having to reorganize supply chains.

But advocates of a stronger United States currency policy argue that Trump himself carries plenty of blame.

Most economists do not consider a trade deficit to be a marker of economic weakness. That contradicts Trump's claim that China is paying the tariffs. Imports rose 2.1 percent to $264.9 billion, boosted by foods, consumer goods, computers and aircraft.

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"The widening trade balance in December is a blow to USA trade policy".

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