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US Trade Deficit: Record High Despite Trump’s Tough Trade Talk

 2 min read / 

The US trade deficit has exceeded expectations, reaching a 9 year high following a significant increase in imports.

According to figures released at 08:30 ET on Tuesday by the Commerce Department, the US trade deficit increased by 5.3% to $52.1bn to the highest levels since October 2008. The value of imports in December increased by 2.5% to a record high of $256.5bn. Imports were up $2.7bn from $50.4bn in November.

Economists had predicted that the trade deficit could rise upward to $52bn. When adjusted for inflation, the trade deficit increased from $66.5m to $68.4m from November.

This meant that for the full year, the US trade gap increased by 12.1% to a 9-year high of $566bn. Despite Trump’s election promise to redress the balance of trade, the US-China trade deficit also increased by 8.1% to $375.2bn over the course of the year. Exports also increased by 1.8% to a record high of $203.4bn.

GDP expanded by 2.6% in the fourth quarter, with growth for 2017 standing at 2.3%. In 2016, GDP grew by 1.5%. The large deficit meant that the US was prevented from reaching a 3% growth rate in the third quarter in a row: a feat last seen in 2005.

Trump’s economic plan has been to tackle the trade deficit with significant tax cuts, such as the corporate tax reform passed in December as well as to impose high tariffs on imports. Although this will poll well with Trump’s ‘America First’ electoral base, economists have highlighted that Tuesday’s figures reflect macroeconomic shifts in world trade.

The higher import valuation for American could be attributed to higher oil prices and a strengthening economy, as Americans tend to buy more imports when they enjoy higher levels of prosperity. Most of the imports were consumer goods, such as foreign-made cars, computers, mobile phones with the majority being produced in China.

Earlier in January, Trump announced plans to impose tariffs on solar panel imports, predominantly made in China, the Philippines and Malaysia.

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