US trade deficit soars to near decade high as Trump tries to narrow the gap
The monthly negative balance between American exports and imports surged to multi-year highs in February. The trade gap rose 1.6 percent to $57.6 billion, the US Commerce Department reported on Thursday.
It is America's highest monthly trade deficit since 2008, attributed partly to surging commodities prices. President Donald Trump’s administration has been seeking to eliminate the gap, saying that the United States is being taken advantage of by its trading partners. Imports from China dropped 14.7 percent in February.
However, Trump’s tariffs are unlikely to change the situation, experts say. “The US continues to expand faster than most other industrialized countries, so it should not surprise anyone that the trade deficit is worsening,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania, as quoted by Reuters. “Tariffs may sound like a good way to change the pattern of trade, but they tend to raise prices rather than modify the trade fundamentals.”
Some experts say the US trade deficit will only grow, as the economy doesn’t supply enough for the ever-growing demand. “We suspect widening trade deficits and resulting subtractions from GDP growth will be a persistent feature of GDP this year as domestic demand outpaces the economy’s supply potential,” John Ryding, chief economist at RDQ Economics in New York, told Reuters. “Tariffs will do nothing to lessen this trade imbalance, unless there is a retaliatory escalation that leads to an economic downturn.”
The United States has been running consistent trade deficits since 1976 due to growing imports of oil and consumer products. Last year, the biggest trade deficits were seen with China, Mexico, Japan, Germany, Vietnam, Ireland and Italy.
Growing trade deficits can be biting for the US economy in two ways. First, it means the US economy is fueled by skyrocketing debt, and sooner or later countries sponsoring America could ask for the debt to be repaid. Second, when buying instead of producing, American companies are losing expertise, and the US economy is losing competitiveness as a producer of goods.
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