A record-breaking US trade deficit: Does it really matter?

Trump dealt blow as US trade deficit jumps

US trade deficit hits 10-year high as Trump trade wars backfire

But the deficit has been a long-standing bugaboo for Trump.

Trump has pledged that once his brilliantly negotiated deals go through - the new North American Free Trade Agreement gets ratified by Congress, China fully capitulates to all his wildest demands, the European Union and Japan suddenly decide to buy more of our cars, etc. - our balance of trade will turn around.

"While not economically significant, the data point has gained political importance as President Trump ties his success to the trade deficit", a team of researchers at the Center for Strategic and International Studies think tank wrote in a research note Wednesday. "It has become a number that fundamentally matters because it is a statistic to which Trump is accountable". Yet numerous president's critics do not blame him for this, saying some fluctuations in the trade deficit are largely beyond his control.

Agriculture workers, in particular, have argued that they already are the collateral damage.

Markets are struggling for direction as traders await any update on negotiations between the United States and China on a trade agreement.

In the first 11 months of 2018, the USA trade deficit in goods and services with the world increased $52 billion, or about 10%, from the same period in 2017.

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"Is the juice going to be worth the squeeze?" I have great respect for President Xi, but we can't have that.

Put another way, by Trump's own benchmark, the USA is 20% worse off than it was at the end of 2016, just before he took office. Trump asked China to abolish tariffs on U.S. agricultural products earlier this month.

Christine McDaniel of the Mercatus Center at George Mason University says that should come as no surprise, given that the USA runs a low saving rate and a very high consumption rate compared to other large economies like China.

The release of the December report was delayed by a 35-day partial shutdown of the government that ended on January 25.

"History shows that in times of USA economic growth we tend to run higher deficits just because USA consumers and businesses import a lot of their consumption".

There are clear indicators that the Chinese economy is taking a hit from American tariffs. The answer largely (though not exclusively) has to do with Trump's own economic policies.

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Meanwhile, US Trade Representative Robert Lighthizer and EU Trade Commissioner Cecilia Malmstrom are meeting on Wednesday in Washington, where the issue of allowing America's agriculture industry access to Europe is expected to be discussed. Derek Scissors, resident scholar at American Enterprise Institute calculates the tax cuts could boost the trade deficit by $200 billion. And he may settle for a deal that falls short of Beijing agreeing to make concrete and enforceable changes to curb theft of US intellectual property, including cybertheft.

But in 2018, the U.S. exported fewer goods compared with how much it bought.

There were also notable declines in US shipments to China of frozen fish and American-made cars, among the other products hit by higher tariffs.

"This is a major reason why economists say, 'You really don't want this as your scorecard, "' said Phil Levy, a former senior economist for trade with president George W. Bush's council of economic advisers.

Though President Donald Trump has always been fixated on trade deficits, incorrectly seeing global trade as necessarily having a loser for each victor, almost every credible economist - and anyone who understands even basic economics - knows the president is fundamentally wrong on this one.

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