The Commerce Department released figures on Tuesday that shows the trade gap in goods and services rose to $566 billion last year, the highest level since $708.7 billion in 2008. Imports set a record $2.9 trillion, swamping exports of $2.3 trillion, according to CTV News Canada.
Imports increased 2.5 percent in December to a record $256.5 billion, while exports edged up 1.8 percent to $203.4 billion, also a new record. Overall, in 2017, the U.S. trade gap leaped 12.1 percent to a nine-year high of $566 billion.
The huge deficit in the fourth quarter of 2017 prevented the U.S. from reaching the 3.0 percent economic growth in the third quarter, a feat last seen in 2005. Gross Domestic Product (GDP) rose 2.6 percent in the third quarter, however, the higher trade deficit shaved off 1.1 points. The GDP is a indicator of economic growth.
Imports from China and Mexico hit record highs
The year 2017 saw the U.S. importing more foreign-made cars, computers, cell phones and other consumer goods, much of which were produced in China. The goods deficit with China rose 8.1 percent to hit a record $375.2 billion in 2017, while the trade gap with Mexico rose to $71.1 billion.
President Trump wants to reduce the trade deficit between the U.S. and China and Mexico, arguing that his “America First” trade policies, coupled with full employment and the massive tax cuts that went into effect in January will give the country equal footing with the rest of the world.
Trump slapped broad tariffs on imported solar panels and large washing machines in January, and is considering slapping tariffs on steel and aluminum for national security reasons. And he really wants to impose trade sanctions on China for the theft of U.S. intellectual property. Then there is the North American Free Trade Agreement with Mexico and Canada (NAFTA).
“Looking ahead, we expect the trade deficit to widen further in 2018,” said Gregory Daco, chief U.S. economist at Oxford Economics. “A strong economy is likely to encourage consumers to buy more imported goods,” he added, according to Market Watch.
While Trump sees a trade deficit as a sign of economic weakness and unfair trading practices, most economists point out that reducing the deficit with increased tariffs would do little to solve the problem because the overall trade deficit is tied more to macroeconomic factors.
