Trump Is Losing The Trade War With China Based On His Favorite Report Card, And It\'s Probably Going To Keep Getting Worse

Shrinking the US trade deficit has been a key goal of President Donald Trump's trade war.

But the US Census Bureau announced Thursday that the US trade deficit grew to $55.5 billion in the month of October, the highest in exactly 10 years. That was a 1.7% jump from September, as imports rose by 0.2% and exports fell by 0.1%.

Trump has long been focused on the trade deficit as a signal that his administration's tariffs on Chinese goods and metals are working, despite the fact that most economists discount the measure as a sign of effective trade policy.

Looking at the main target of the trade war, China, the trade deficit was similarly dismal. The unadjusted goods trade deficit hit $43.1 billion in October, the highest level ever.

While Trump may not like the results, there are good reasons the trade deficit is expanding. And part of the blame lies in the president's own policies.

On the import side of the ledger:

  • The US economy is stronger, and US consumers' appetite is outpacing the country's ability to produce the goods they want.
  • This means the US needs goods from other countries to satisfy consumer demand, leading to import growth.
  • The increase in demand is in part because of the significant amount of fiscal stimulus injected into the economy by Trump's tax cuts and the massive bipartisan budget deal.
  • Goosing the economy, while helping Trump claim victories on things like a stronger GDP, also means the president's trade report card looks worse.

At the same time, exports are cooling because of retaliatory tariffs on US products:

The trade policy exacerbates the existing issues that were already causing weak export growth, Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote Thursday.

"The stronger dollar and slower growth in China and Europe are hurting exports, and the tariffs are a real problem too; exports of soybeans fell by $0.8 billion to a four-year low, down 43% year-over-year," Shepherson said.

Source : https://www.businessinsider.com/us-china-trade-war-record-trade-deficit-trump-2018-12

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