The Economy

Trade Deficit Rises 9.6% to Near 5-Year High

"Team Trump really has their work cut out for them if they are going to stick with the campaign pledge to double growth."
Matthew HellerMarch 8, 2017
Trade Deficit Rises 9.6% to Near 5-Year High

After declining in December, the U.S. trade deficit rose to a near five-year high in January amid a surge in imports, illustrating how difficult it may be for President Trump to fulfill his campaign pledge to reduce America’s trade gap.

The Commerce Department said the trade deficit increased 9.6% to $48.5 billion, the highest level since March 2012 when the deficit was $50.2 billion. When adjusted for inflation, it rose to $65.3 billion from $62.0 billion in December.

The 0.6% gain in U.S. exports to $192.1 billion, reflecting stronger auto sales, was outweighed by a 2.3% increase in imports, led by mobile phones, oil, and foreign-made cars.

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Reuters said the widening trade gap points to slower growth in the first quarter and poses a challenge for Trump, who has pledged to boost annual economic growth to 4% and renegotiate trade deals in favor of the United States.

“Team Trump really has their work cut out for them if they are going to stick with the campaign pledge to double growth,” said Chris Rupkey, chief economist at MUFG in New York. “‘If it is not made in America then we don’t want it’ is what the Trump administration is saying.”

Growth slowed to a 1.9% annualized rate in the final three months of 2016, with trade cutting 1.7 percentage points from gross domestic product.

The New York Times warned against taking a simplistic approach to the trade deficit, noting that the surge in imports “reflects the relative strength of the U.S. economy. American consumers have rising incomes, and inevitably they spend part of that income on imported goods.” favicongenerator.org

“While the January report has some weak spots and areas for concern, it is not nearly the unabashed bad news that a simplistic reading of the trade deficit would suggest,” the Times said.

In January, imports of goods and services rose to $240.6 billion, the highest since December 2014, as the country imported 259 million barrels of crude oil. But the price of oil rose 9% from the start of December to the start of January.

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