Day 385: Trump Repeatedly Promised to Shrink Trade Deficit — It Just Hit Nine-Year High

On the campaign trail, Donald Trump proclaimed that the U.S. could not continue to do business as usual. Regarding trade he was clear: the U.S. is importing too much and not exporting enough.

Countries like China took advantage of the U.S. in trade deals and it cost American taxpayers billions of dollars, he proclaimed. Mexico would pay for the border wall, if not in actual cash, then potentially in reduced payments from trade deals, he pivoted.

In his State of the Union just a week ago, Trump boasted that the U.S. had “finally turned the page on decades of unfair trade deals that sacrificed our prosperity and shipped away our companies, our jobs and our nation’s wealth.”

That doesn’t appear to be based on anything factual as a year later, the trade deficit has gone the opposite way that Trump promised: it has ballooned to a nine-year high of $566 billion, a 12.1% increase from 2016. The deficit from goods and services from China alone hit a whopping $375 billion deficit. Imports from Mexico hit a new peak too.

Despite all of the bluster, Trump hasn’t actually tried to enact any policies that would have any real effect on the trade deficit, and he’s largely beholden to the global economic factors.

The President’s vow to improve U.S. trade agreements and thereby ‘fix’ the trade deficit was a bit like someone promising to end a long dry spell by performing a rain dance. We may harbor serious doubts about whether such dances really affect precipitation levels, but it’s not really a test if the claimant doesn’t even dance.

In 2018, expect more of the same.

“Looking ahead, we expect the trade deficit to widen further in 2018,” said Gregory Daco, chief U.S. economist at Oxford Economics. A strong economy is likely to encourage consumers to buy more imported goods, he said.

And a lot of that is due to the tax cut.

With the economy at full employment right now and output relatively constrained, Harvard Professor Jeffrey Frankel believes the impact could be more problematic, because “the increase in spending afforded by tax cuts goes entirely, rather than only partly, into the current-account deficit,” he wrote in January.

Trump’s only real economic promise was to reduce the trade deficit. Instead, the margin has expanded and is likely to continue to do so, in large part due to the few policy achievements he’s actually been able to make.

385 days in, 1077 to go

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