Despite President Trump’s vocal vows to narrow the trade gap between the United States and major trading partners, that deficit has now peaked at a record-breaking $891 billion, The New York Times reports.
The shift was partly out of the president’s control, with driving factors including a strong U.S. dollar and a slowdown in demand for U.S. goods. Other factors, however, included a $1.5 trillion tax cut financed through additional debt and a high-profile trade war escalated by Trump, particularly with respect to China.
Most economists have consistently indicated that Trump’s characterization of trade deficits as a measure of how well the United States fares in trade agreements is misguided. However, by Trump’s own measure, the widening gap may be indicative of a weakened stance between the U.S., China, and the European Union in particular. To combat the imbalance, Trump has instituted tariffs on a variety of goods — including steel, aluminum, washing machines, and solar panels.
Despite these measures, that deficit grew by about $70 billion over the last year.
While for the most part, economic experts do not dwell on the importance of trade deficits as meaningful economic indicators, Trump himself has been bold in his assessment of their importance — and the urgency around narrowing them.
“I am a Tariff Man,” he tweeted at the end of last year. “When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so. It will always be the best way to max out our economic power. We are right now taking in $billions in Tariffs. MAKE AMERICA RICH AGAIN”
Despite Trump making the trade metric a standout piece of his approach to economics, traditional knowledge on the subject is simply that trade deficits generally grow or shrink in the opposite direction of the health of the country’s economy as a whole.
— Bloomberg (@business) March 6, 2019
That means that even as Trump is frustrated by the widening deficit, it is in fact an indicator of good economic tidings overall.
“This is a major reason why economists say, ‘You really don’t want this as your scorecard,”’ said economic Phil Levy, who was on the Council of Economic Advisers for George W. Bush. “It’s not an accident. When things are booming we consume more imports.”
“Trade wars are good, and easy to win,” the president has tweeted.
Reports indicate that Trump may be close to reaching a deal with China regarding trade, potentially stemming the steady widening of the trade gap between the two countries.