The U.S. trade deficit widened to the biggest monthly and annual levels since the last recession, underscoring the inherent friction in President Donald Trump’s goal of narrowing the gap while enjoying faster economic growth.
The deficit increased 5.3 percent in December to a larger-than- expected $53.1 billion, the widest since October 2008, as imports outpaced exports, Commerce Department data showed Tuesday. For all of 2017, the goods-and-services gap grew 12 percent to $566 billion, the biggest since 2008.
The trend may extend into this year: Solid consumer spending and business investment — assuming they hold up amid the recent stock-market rout — will fuel demand for foreign-made merchandise. While improving overseas growth and a weaker dollar bode well for exports, Trump’s efforts to seek more favorable terms with U.S. trading partners remain a work in progress, and his tax-cut legislation may cause the deficit to widen further.
One of the central themes of Trump’s presidential campaign was a pledge to level the playing field for American workers. In his first State of the Union address last week, Trump promised to “fix bad trade deals and negotiate new ones.” The president recently placed tariffs on imported solar panels and washing machines, sparking concern the U.S. may prompt trade wars.
With two of Trump’s main targets, China and Mexico, the imbalances worsened in 2017. America’s merchandise-trade gap with China, the world’s second-biggest economy, widened 8.1 percent in 2017 to a record $375.2 billion.
The goods-trade deficit with southern neighbor Mexico increased 10 percent last year to $71.1 billion, the highest since 2007. The administration is currently renegotiating the North American Free Trade Agreement with Mexico and Canada, and Trump has repeatedly threatened to withdraw from the pact.
U.S. merchandise exports to China and Mexico in 2017 were the highest on record — and so were imports.
For the full year, total U.S. exports rose 5.5 percent to $2.33 trillion, while imports climbed 6.7 percent to a record $2.9 trillion. Both showed the biggest gains since 2011.
The December goods-and-services gap was wider than the median estimate of economists surveyed by Bloomberg for $52.1 billion.
Exports rose 1.8 percent to $203.4 billion in December from the previous month, led by record shipments of capital goods and gains in industrial supplies and materials. Imports advanced 2.5 percent to $256.5 billion, boosted by record U.S. purchases of consumer goods, capital goods and food products.
The monthly figures add to details for the fourth quarter, when trade was a substantial drag on the economy, and show how a widening deficit may mitigate any gains in the pace of expansion in 2018. Net exports subtracted 1.13 percentage points from gross domestic product growth, which registered an annualized rate of 2.6 percent in the October-December period.
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