Donald Trump won key midwestern states and the presidency in no small part because of his focus on trade reforms and promise to “speedily reduce the deficit.” However, contrary to Trump’s promises, the overall U.S. goods and services deficit in Trump’s third year in office is up 14% ($77 billion) relative to the trade deficit in 2016, the last year of the Obama administration.
Thanks to a $44 billion improvement in the U.S. energy trade balance in 2019, the U.S. trade deficit with the world in 2019 decreased $27 billion relative to 2018. The goods and services deficit went from $646 billion in 2018 to $619 billion in 2019. U.S. oil and gas imports decreased $36 billion and U.S. oil and gas exports increased $8 billion from 2018 to 2019. The improvement in the energy trade balance was slightly larger than the $43 billion decline in the 2019 goods trade deficit. Shifts in the energy trade balance is not a sustainable way to decrease the U.S.-world trade deficit and poses serious climate change threats.
Meanwhile, the U.S. non-energy goods trade deficit with the world and U.S. manufacturing trade deficit with the world are both up in 2019 relative to 2016, Obama’s last year. The 2019 U.S. non-energy goods trade deficit with the world is up $122 billion (17%) relative to 2016 while the U.S. manufacturing trade deficit with the world is up $130 billion (14%) relative to 2016.
In 2019, the U.S. goods trade deficit with China declined $82 billion relative to 2018. But this was countered by a $39 billion increase in the goods trade deficit with the rest of the world (i.e. the China goods deficit dropped from $432 billion in 2018 to $350 billion in 2019 while the rest of the world goods trade deficit increased from $469 billion in 2018 to $508 billion in 2019). Economists note that such “trade diversion” is largely driven by imbalances in currency values: While tariffs on Chinese goods may promote a decline in Chinese imports to the United States, deficits with the rest of the world are likely to increase while the U.S. dollar remains unsustainably high in value. The dollar’s value is bid up in part by countries such as China buying up and holding massive dollar reserves. Note: The U.S. goods trade deficit with China in 2018 was the largest ever recorded, at $432 billion, up from $396 billion in 2017. This compares to $373 billion in 2016, Obama’s last year.
The U.S. goods trade deficit with North American Free Trade Agreement partners Mexico and Canada increased to $243 billion in 2019 – up 31% and $58 billion since the start of the Trump administration. The NAFTA deficit grew 10% ($23 billion) between 2018 and 2019 as Trump stonewalled congressional Democrats for a year before reopening and rewriting the revised NAFTA that he signed in 2018 to remove giveaways to Big Pharma and strengthen anti-outsourcing terms.
These figures are adjusted for inflation to the base month of December 2019. Thus, the figures represent changes in trade balances expressed in constant dollars. So, for years prior to 2019, the numbers are different than the data unadjusted for inflation that is provided by the U.S. Census Bureau.