US trade deficit jumps to ten-year high

The US trade deficit has jumped to a ten-year high, dealing a major blow to President Donald Trump as he prepares to kick-start his 2020 re-election campaign.

The US trade gap – the difference between how much it imports compared to how much it exports – ballooned to $621bn (£472.5bn) last year.

This is the widest it has been since 2008, when the global financial crisis plunged the US into recession, despite a pledge by Trump to make deficit reduction one of his key priorities.

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“While most economists dismiss the trade deficit as a measure of the US economy's strength, President Donald Trump has made the reduction of the trade deficit a key benchmark for his year-long trade war,” says Business Insider.

The figure will prove particularly embarrassing for a president who has repeatedly called the deficit a “political and politician-made disaster” and claimed it could be “corrected”.

It has driven his “America First” protectionist economic policies, which have seen the US impose huge tariff hikes on billions of dollars on foreign goods, most notably steel and aluminium imports.

It was hoped that by making imports more expensive, more Americans would be dissuaded from buying foreign goods, so bringing down the deficit. “But the opposite has happened,” says Michelle Fleury, BBC North America business correspondent.

“Part of the problem is Trump’s own tax policies. They boosted US consumption and a lot of that spending went abroad,” she writes. “This happened as growth was slowing in other parts of the world, contributing to a rising dollar. That made US exports more expensive and less competitive.”

It has also had the knock-on effect of provoking a global trade war between the US and China, which threatens to derail an already slowing global economy, and which appears to be “backfiring”, says The Guardian.

“The data could emerge as a political vulnerability for Trump as he prepares for his 2020 re-election bid battling low approval ratings and a crowded field of Democratic contenders,” says the Financial Times, and “comes amid other signs of unease in the country’s industrial heartland about the effectiveness of Trump’s policies”.

Fleury adds: “Of course, an economic downturn would help reduce the trade deficit, but who wants that?”