Economic review

U.S. trade deficit rises 12%, hits 9-year high

2018-02-07 16:52:00 (Beijing Time)         China Daily

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The United States saw its largest trade deficit in nine years in 2017, news that is likely to increase the anxiety of the Trump administration for reasons that many economists disagree with.

The U.S. trade deficit with the rest of the world jumped 12.1 percent in 2017 to $566 billion. Meanwhile, its trade deficit with China increased by $28.2 billion to $375.2 billion, according to a report of U.S. international trade in goods and services released Tuesday by the Commerce Department.

In 2017, U.S. exports to China increased by $14.8 billion to $130.4 billion while U.S. imports from China increased $43 billion to $505.6 billion. Statistics from China are often different due to calculation methods.

The U.S. also increased its trade deficit with Mexico, the other major U.S. trade partner, by $6.7 billion to $71.1 billion in 2017.

In December alone, the U.S. deficit grew by 5.3 percent to $53.1 billion. But the U.S.-China trade deficit declined 13 percent in December due to a 7.5 percent jump in U.S. exports to China and a 7.6 percent fall in U.S. imports from China.

The report shows that much of the U.S. trade deficit was a result of the strong import demand in the U.S., in everything from industrial supplies and materials, such as crude oil, to capital goods such as computers, to consumer goods such as cell phones and other household items.

U.S. President Donald Trump has long made trade deficits, especially with China and Mexico, a major issue long before he started his 2016 presidential campaign. That is in spite of the fact that most economists argue that the U.S. trade deficit is largely the result of U.S. fiscal policy, a low savings rate and the role of the U.S. dollar as a global reserve currency.

The U.S. has been running a trade deficit since 1976, and it had trade deficits with 99 trading partners in 2016.

A surging U.S. economy and the U.S. tax cut bill that went into effect in January have both helped increase the U.S. trade deficit, complicating President Trump's promise to his supporters to bring down the trade deficit.

"The larger U.S. trade deficit is absolutely not the fault of China or Mexico," said Gary Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics.

Hufbauer, the deputy assistant secretary for international trade and investment policy of the U.S. Treasury from 1977 to 1979, said the large deficit simply reflects the strong dollar in the first half of 2017 and the good U.S. economy.

"If Trump once again blames trade agreements other countries should tune him out," he told China Daily on Tuesday.

"I think he means the trade deficit is too large," Derek Scissors, a resident scholar at the American Enterprise Institute, said of Trump's rhetoric of fair and reciprocal trade.

Scissors noted that Trump has never made demands or given details of what an acceptable trade imbalance should be. "A truly fair and reciprocal trade will not have zero trade imbalance. That doesn't make any sense," he said on Tuesday.

Scissors explained that U.S. consumers have much more purchasing power than any other consumers in the world. "Of course we will run a trade deficit," he said.

"The U.S. economy is much greater than, much richer and growing faster than the Mexican economy. How is it that Mexico can buy as much from the U.S. as the U.S. buys from Mexico? That obviously doesn't make any sense."