Trump’s Plan to Reduce Trade Deficit Falters as It Hits an All-Time High Instead

March 6, 2019, 5:42 PM UTC

President Trump’s America First policies are not having their intended effect.

The Commerce Department reported Wednesday the U.S. posted a more than $891 billion merchandise trade deficit last year—the largest in the history of the country.

Significantly, the trade deficit with China hit a record $419 billion, despite a series of tariffs the administration imposed on Chinese goods to decrease reliance on imports.

Meanwhile, the overall goods and services deficit jumped 19% between November and December 2018, to $59.8 billion, the highest monthly trade deficit in 10 years.

The data shows that Trump’s America First policies to close the trade gap haven’t had their desired effect. Americans are importing far more from abroad than they are exporting—imports grew 7.5% while exports increased only 6.3%.

What’s more, Trump’s $1.5 trillion tax cut enacted in late 2017 served to further fuel the deficit. The government had to borrow to pay for the cut, and some of those dollars came from foreign investors.

Simultaneously, the Federal Reserve raised interest rates four times last year to offset fears of an overheating economy, thereby increasing the strength of the dollar and encouraging purchase of relatively inexpensive foreign goods.

This is the third consecutive year of increasing trade deficits, topping the previous record in 2006. But while that might be of concern for Trump, many economists disagree with his emphasis on reducing the deficit. They suggest such deficits are not a reflection of American trading relationships, but rather simply a reflection of a variety of economic forces.