China trade talks doing good

Trump dealt blow as US trade deficit jumps

Trump has boasted of a trade deal with China that the administration hopes to complete in the near future, but economists say any such deal would only divert exports from other countries, shrinking the gap between the us and China but leaving the overall deficit largely unaffected. The irony is that those policies likely contributed to the deficit.

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

The goods trade deficit with China rose to a record $419.2 billion, despite Trump's decision previous year to impose tariffs on $50 billion in imports from the country.

When adjusted for inflation, the goods trade deficit surged $10.0 billion to a record $91.6 billion in December.

While Mr Trump frequently cites the deficit as evidence of the failure of his predecessors' trade policies - even though most economists don't dwell on the indicator - the gap has increased by $119bn during his two years as president.

Despite signals from Chinese and US officials that some truce could soon be at hand, there are few signs of any truly transformed trade relationship.

A truck passes a stack of China Shipping containers at the Port of Savannah in Georgia on July 5, 2018. The imbalance with Trump bete noire China hit a record $419 billion. He has frequently labeled it an outright economic loss.

The December trade gap jumped to $59.8 billion, which was also a 10-year high, according to media reports.

As historical data shows, trade deficits usually jump following tax cuts, like the 2001 and 2003 tax cuts under President George W. Bush, and President Ronald Reagan's cuts in the early 1980s. It simply reflects the greater value of what the United States imports compared to what it exports. And it's not necessarily a cause for concern.

"All countries run trade deficits whenever they consume more than they produce", said Kimberly Clausing, an economist at Reed College in Oregon. "But there is also a strong unanimity that we should have a positive agenda with the U.S".

"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-wrote one of the papers. He has taken note of market gains that have followed signs of progress and has told his advisers he's concerned that the lack of an agreement could undermine stocks, Bloomberg News has reported. They and other Democrats should stop mimicking Trump's economic silliness, pledge to end trade wars, vow to open up markets and then outline a generous and comprehensive package to address workers and regions adversely impacted by trade.

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During his recent speech at CPAC, the president said "And now, last year, we had nearly a $500 billion trade deficit with China". By contrast, in 2018, after years of economic expansion, the gap in goods had swollen to a record $878.7 billion.

Kimberly Clausing, an economist at Reed College, points to a sharp increase in government borrowing.

What's more, Trump's $1.5 trillion tax cut enacted in late 2017 served to further fuel the deficit. This meant the United States had to resort to additional borrowing to help drive growth.

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. But his impulse to achieve faster growth through government borrowing contributed to a wider trade gap.

Christine McDaniel of the Mercatus Center at George Mason University says that should come as no surprise, given that the US runs a low saving rate and a very high consumption rate compared to other large economies like China. American consumers and businesses have not stopped buying foreign goods, as the new data indicates, but they are paying higher prices for the privledge of doing so.

Researchers at the New York Federal Reserve examined this issue past year. This can lead to declines in both imports and exports.

But soybean exports, a crucial crop across vast expanses of the country, fell 18% for the year to $18.2bn amid a Chinese boycott sparked by Trump's trade war.

Cellphone imports increased $0.6 billion.

On a day-to-day basis, not very much. Last year, he started with foreign steel and aluminium and a number of imports from China.

But trade battles do have consequences.

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