Trade Deficit Hits Highest Level of the Year

Written by SK Ashby

While Trump pursues his stated goal of reducing our trade deficit, our deficit is actually still increasing.

According to a new report from the Commerce Department, our trade deficit widened to the highest level of the year in April as exports declined more than imports did.

Moreover, the amount that trade contributed to economic growth during the first quarter of the year was revised downward.

From Bloomberg:

The widening trade gap is the latest indication that Trump’s tariff war with China is weighing on business decisions. Foreign purchasers may also be balking at U.S. exports due to the strong dollar, while Chinese buyers could be continuing to pare shipments from America.

Separate government data Thursday showed net exports and inventory accumulation added a combined 1.56 percentage point to the pace of gross domestic product growth in the first quarter, revised from a 1.68 percentage point-gain in the initial GDP report released last month.

The 4.2% monthly decline in exports reflected broad-based drops across industrial supplies, capital goods, vehicles and consumer goods. A 2.7% decrease in imports was led by capital goods, vehicles, and industrial supplies.

These figures are from before Trump increased the size of his tariffs on Chinese goods from 10 to 25 percent, but that doesn't necessarily mean these numbers will look significantly different when the next monthly report is released.

If imports from China are replaced with imports from other countries such as Vietnam, our trade deficit will remain high if not climb higher as American exports to China and other countries decline more than imports do.

At the end of the day, the American need for cheap imports is greater than any other nation's need for American exports.