Media Moves

Coverage: Trade deficit rises to near 10-year high

April 6, 2018

Posted by Chris Roush

economy-bad-shapeThe U.S. trade deficit increased to a near 9-1/2-year high in February, with both imports and exports rising to record highs in a sign of strong domestic and global demand.

Lucia Mutikani of Reuters had the news:

News on Thursday of the worsening trade deficit came as the United States and China were embroiled in tit-for-tat tariffs which escalated trade war fears and rattled financial markets.

President Donald Trump’s administration is pursuing import duties to eradicate the deficit and protect domestic industries from what he says is unfair foreign competition. But economists say the trade penalties will not reverse the deficit.

“The U.S. continues to expand faster than most other industrialized countries, so it should not surprise anyone that the trade deficit is worsening,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.”Tariffs may sound like a good way to change the pattern of trade, but they tend to raise prices rather than modify the trade fundamentals.”

The Commerce Department said the trade gap increased 1.6 percent to $57.6 billion in February, the highest level since October 2008. The deficit has now increased for six straight months. Most of the rise in the trade deficit in February reflected commodity price increases.

Jeffrey Bartash of MarketWatch.com reported that imports are rising because the U.S. economy is strong:

There also was a big spike in services imports, reflecting Comcast unit NBC’s  payments for the rights to broadcast the 2018 Winter Olympic Games.

The U.S. is importing more goods largely because the economy is so strong: Households clamor foreign goods such as consumer electronics and autos while businesses need raw materials. A weakening dollar also makes imports more expensive.

Exports also climbed 1.7%, with the U.S. shipping more autos and aircraft. China this week said it would raise tariffs on American cars and planes in retaliation for U.S. tariffs.

U.S. trade deficits in goods with China ($34.7 billion), Mexico ($12.2 billion) and Germany ($12.9 billion) are running ahead of 2017’s pace. Gaps with Canada and Korea are not as large, though.

Paul Wiseman of The Associated Press reported that exports of cars and auto parts had big increases:

Exports of cars and auto parts posted big increases in February as did imports of pharmaceuticals, crude oil and civilian aircraft.

Trump campaigned on a pledge to take aggressive action to reduce America’s massive trade deficits. In March, he slapped tariffs on imported steel and aluminum but exempted most major countries except China and Japan. China counterpunched this week with tariffs on $3 billion in U.S. products.

On Tuesday, the U.S. proposed slapping tariffs on $50 billion in Chinese imports, and Beijing responded within hours with plans to tax $50 billion in American products, including soybeans and small aircraft. The two countries have signaled that they will seek to settle their differences before the tariffs take effect.

The president views trade deficits as a sign of economic weakness and as the result of bad trade agreements and unfair practices by America’s trading partners. Most economists say they are caused by bigger economic forces, mainly the fact that the United States consistently spends more than it produces.

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