The Trade Deficit Has Reached a 10-Year High

Written by SK Ashby

According to a new report from the Department of Commerce, our trade deficit has reached the highest level since before President Obama was elected president.

Imports increased and exports decreased during the month of October, driving our trade deficit to the highest level since October of 2008. The overall increase in imports was primarily driven by imports from China which reached a new record high, but our trade deficit with the European Union also exploded.

The Commerce Department said Thursday that the gap between the United States sells and what it buys from foreign countries hit $55.5 billion in October, the fifth straight increase and highest since October 2008.

The politically sensitive deficit in the trade of goods with China rose 7.1% to a record $43.1 billion. The goods gap with the European Union widened 65.5% to a record $17.6 billion.

Led by shipments of medicine and cars, overall imports rose 0.2% to a record $266.5 billion. Exports fell 0.1% to $211 billion.

Year over year, our trade deficit is nearly 12 percent higher now than it was at this point last year, meaning it's higher today than it was before Trump started his trade war by imposing tariffs on foreign solar panels followed by tariffs on foreign metals and Chinese goods.

Trump's trade war has not reduced our trade deficit because the deficit is driven by American consumers, not foreign businesses or governments. Trump's tariffs are also being paid by American consumers, not foreign businesses or governments. Tariffs are a tax on consumption. We are paying for his war.

We have not yet seen data for the busiest shopping season of the year so it stands to reason that our trade deficits for November and December will also set new records regardless of what Trump does.

The only thing that could reduce our trade deficit is a recession and an associated loss of American purchasing power, but even that would be temporary.

We have a consumer and service-based economy that depends on the availability of relatively cheap or free imports to sustain itself. China, on the other hand, has a export-driven economy that ships over $2 trillion worth of goods out of the country each year. It's not a conspiracy to take advantage of American consumers, as Trump says, it's just the nature of our economies.