The Economy

U.S. Trade Gap Climbs 5% in January to $56.6B

The increase in the trade deficit to a nine-year high "will only add fuel to President Donald Trump’s protectionist rhetoric ," an economist says.
Matthew HellerMarch 8, 2018

The U.S. trade deficit rose in January to its highest level in nine years, delivering another jolt to President Trump’s campaign promise to reduce the gap.

The Commerce Department reported Wednesday that the trade deficit in goods and services expanded 5.0% from the prior month to a seasonally adjusted $56.60 billion in January. It was the biggest deficit since October 2008, when President George W. Bush was in the White House, and exceeded economists’ expectations of an increase to $55.1 billion.

The trade gap in January was 16% higher compared with the same month in 2017, when Trump took office.

4 Powerful Communication Strategies for Your Next Board Meeting

4 Powerful Communication Strategies for Your Next Board Meeting

This whitepaper outlines four powerful strategies to amplify board meeting conversations during a time of economic volatility. 

Exports fell 1.3%, largely reflecting a big drop in the volatile category of commercial aircraft shipments. Exports of oil, chemicals and other industrial supplies also declined.

Imports were unchanged at $257.5 billion as the biggest increase in petroleum imports in three years was offset by declines in cellphones, computer chips and other consumer-related goods.

Among the major U.S. trading partners, the politically sensitive deficit with China surged 16.7% to $36.0 billion, the highest since September 2015. The deficit with Canada soared 65% to a three-year high of $3.6 billion.

“The increase in the trade deficit to a nine-year high … suggests that net trade will once again be a drag on economic growth in the first quarter, and will only add fuel to President Donald Trump’s protectionist rhetoric in recent weeks,” said Michael Pearce, senior U.S. economist at Capital Economics.

Trump last week announced he would impose tariffs on steel and aluminum imports to help achieve his deficit-cutting goal. But as MarketWatch reports, Americans are buying more imports in part because of the strength of the U.S. economy is stronger. The highest oil prices in three years are also contributing to the growing deficit.

“I think your story should be titled ‘the trade deficit is growing and that’s a good thing,’” Christine McDaniel, a senior research fellow at the George Mason University Mercatus Center, told Politico. “There is no relation between the trade deficit and industrial decline or success.”