US Trade Deficit Hits Record $891B Despite Trump’s Claim Trade Wars Are ‘Good and Easy to Win’

The Commerce Department announced that the United States posted an $891.2 billion merchandise trade deficit last year, the largest in the country’s 243-year history.

The trade report, which was delayed by the longest government shutdown in American history, shows that the country’s trade deficit exploded well past the previous record, which was $838.3 billion in 2006 ahead of the global economic collapse the following year, The Washington Post reported.

The news comes after Trump for years insisted that he would reduce or eliminate the deficit and declared that trade wars are “good and easy to win.”

Much of Trump’s trade talk has been aimed at China. According to the Commerce Department, the trade deficit with China hit a record $419 billion last year.

When factoring in services, the United States posted a $621 billion trade deficit.

Trump tax cuts made trade deficit worse:

“Economists say the trade deficit is swelling because of broad economic forces, including a chronic shortfall in national savings that was exacerbated by last year’s $1.5 trillion corporate and personal income tax cut,” The Washington Post reported. “As cash-flush businesses and consumers increased their spending, purchases of imported goods rose while the overvalued dollar weighed on exports.”

“Macroeconomics end up ruling. You can’t wish it away. You can’t tariff it away,” former Commerce Department official William Reinsch told The Post.

China trade deal won’t erase deficit:

The Commerce Department report comes as the Trump administration appears to be moving closer to a trade deal with China -- but economists say that even Chinese concessions won’t cut the deficit like Trump wants.

“China has offered to buy a reported $1.2 trillion in additional American products over the next six years in a deal that reportedly would ease each side’s tariffs, usher in changes to Beijing’s state-led economic model and include tough new enforcement mechanisms,” The Post reported. “But most economists say that such increased Chinese purchases probably would only divert U.S. shipments from other foreign customers, shrinking the trade gap with China but leaving the global balance largely unchanged. With the economy at or close to full employment, U.S. farms and factories have a limited ability to sharply increase output to meet a sudden increase in Chinese orders.”

“The costs of the trade war are quite large relative to optimistic estimates of any gains that are likely to be achieved,” said a study authored by economists from the New York Federal Reserve, Columbia University, and Princeton University.


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