The Trade Deficit Is Up Under Trump

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 U.S. trade deficit in the first half of President Donald Trump’s fourth year in office remains 6.5% higher than in the same period in President Barack Obama’s last year, despite a 15% overall fall-off in trade flows related to the COVID-19 pandemic.

U.S. Census Bureau trade data shows that:

  • The effects of the COVID-19 pandemic on commerce in general and trade specifically are evident in the six-month 2020 data: However, despite the 15% overall drop in trade flows, the U.S. trade deficit in the first six months of 2020 was only down 9% relative to the same period in 2019. This is in part because imports from Mexico have begun to rise significantly.
    • Total U.S. goods and services exports in the first half of 2020 were $1.066 trillion relative to $1.266 trillion in 2019. Imports in the first half of 2020 were $1.341 trillion versus $1.563 trillion in 2019.
  • The six-month 2020 trade deficit is 6.5% higher than the deficit for 2016, the year before Trump took office, even as the COVID-19 effect reduced the deficit 9% compared to the first six months of 2019. Comparing the first half of Obama’s last year in office (January to June 2016), the overall trade deficit increased 6.5%, rising from $257 billion to $274 billion in inflation-adjusted terms. (The unadjusted figures provided in the government data base show a rise from $238 billion to $274 billion.)
    • The overall U.S. goods and service trade deficit with the world dropped 9% in first half of 2020 relative to the same period in 2019 from $301 billion to $274 billion in inflation-adjusted terms (The unadjusted figures provided in the government data base show a drop from $297 billion to $274 billion.)
    • The U.S. trade deficit in goods decreased 7.5% in inflation-adjusted terms from $446 billion in the first six months of 2019 to $412 billion in the same period of 2020. However, the trade deficit in goods during these months is still 3% higher than the one experienced in the same period of 2016, rising from $399 billion to $412 billion (in inflation-adjusted dollars).
  • The China deficit is down relative to Obama’s last year, but there is a “trade diversion” effect of imports increasing from other countries.
    • The trade deficit with China decreased 22% in inflation-adjusted terms going from $169 billion in the first half of 2019 to $132 billion in the first half of 2020. It is also smaller compared to 2016, when in inflation-adjusted dollars, it was $173 billion for January to June.
    • In inflation-adjusted dollars, the goods trade deficit with the rest of the world (excluding China) increased from $277 billion to $280 billion in the first half of 2020 relative to the same period in 2019.
  • The deficit with North American Free Trade Agreement (NAFTA) partners is 11% higher in the first half of 2020 relative to the same period in Obama’s last year in office but down relative to 2019 even as Mexican exports to the U.S. began to expand significantly in June.
    • The NAFTA deficit in the first six months of 2020 was $97 billion, 11% higher than the same period in 2016 when it was equivalent to $88 billion in inflation-adjusted dollars. (In nominal terms the goods trade deficit with NAFTA parties increased by 18%, or $15 billion.)
    • The goods trade deficit with NAFTA parties decreased by $19 billion in inflation adjusted terms compared to the same period in 2019, largely because of measures taken to prevent the spread of COVID-19.
    • Even as the COVID-19 pandemic narrowed the trade deficit with NAFTA parties during the first half of 2020 compared to 2019, the reduction was not as large as expected given a jump in Mexican exports in June. More than 80% of Mexican are destined for the U.S. market.  According to the data released by Mexico’s statistics authority (the National Institute of Statistics and Geography), overall Mexican exports grew 75.5% in June relative to May. This resulted in Mexico posting a six-month January to June surplus of $2.6 billion even as Mexican exports decreased overall 12.8% compared to June 2019. Mexican imports also dropped almost 10% more in the same period (22.2%).

These figures are adjusted for inflation to the base month of June 2020. 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.