WASHINGTON – The United States posted its widest monthly trade gap since 2008 in December and a record annual deficit in goods as sturdy economic growth underpinned higher spending by American consumers and businesses.
The international trade deficit in goods and services widened 19 percent in December from the prior month to a seasonally adjusted $59.8 billion, the Commerce Department said Wednesday.
Economists surveyed by The Wall Street Journal had expected a $57.3 billion gap.
The shortfall grew last year despite President Trump’s aim to reduce it.
Over the course of 2018, Donald Trump imposed tariffs on a range of goods that the US imports from other countries, particularly China, in hopes of giving American producers a competitive edge.
He publicly lambasted companies that outsourced jobs, renegotiated pacts with major US trade partners like Mexico, Canada and South Korea, and rankled longtime European allies by deeming their steel and aluminum exports a threat to national security.
Still, the trade gap swelled 12 percent from 2017 to $621 billion.
Excluding services that the US sells to foreigners, such as tourism, intellectual property and banking, the deficit grew 10 percent to $891.3 billion, the largest level on record.
Economists say the shortfall was fueled, ironically, by another Trump administration policy: tax cuts and spending increases that juiced demand from US consumers and businesses at a time when growth in the rest of the world was slowing.
Concern that the US economy could overheat prompted the Federal Reserve to raise interest rates four times in 2018, contributing to a strong dollar in the second half of the year that made foreign goods relatively cheap for Americans.
As a result, US imports grew 7.5 percent, while exports increased just 6.3 percent.
“Higher take-home incomes for households have definitely proven to be very conducive to imports,” said Pooja Sriram, an economist at Barclays. “The outcome has been in almost the opposite direction of what the administration has wanted.”
US imports of consumer goods last year jumped 7.7 percent to $647.9 billion, fueled in part by a 22 percent rise in inbound shipments of drugs.
Industrial supplies like fuel and crude oil were another driver of the trade gap, with imports rising 13 percent from 2017 to $575.7 billion.
Highlighting the limitations of Trump’s trade policies, the goods deficit widened most with China, the US’s largest commercial partner and the main focus of White House efforts.
That is partly because Chinese authorities responded to tariffs by drastically scaling back their country’s purchases of key US exports like soybeans, cars and metals, production of which is concentrated in states that Trump won in the 2016 election.
US goods exports to China fell 7.4 percent in 2018 to $120.3 billion, while imports from China grew 6.7 percent to $539.5 billion as Americans increased their purchases of electronics, furniture, toys and other products.
But the deficit in goods also widened in other countries where Trump aimed his trade war, including the European Union and Mexico.