The trade deficit with China hit a record high in 2017, defying President Trump’s repeated promises to shrink a number that he regards as a test of whether other nations are treating the United States fairly.
Release of the new trade figures came one week after the president boasted in his State of the Union address that the United States had “finally turned the page on decades of unfair trade deals that sacrificed our prosperity and shipped away our companies, our jobs and our nation’s wealth.”
Union leaders who cheered the president’s promise to restore lost manufacturing jobs seized on the Commerce Department report as evidence that tougher action is required. “As a candidate, the president promised to reduce the trade deficit, end China's cheating, stop unfair trade in steel and aluminum, and reverse the tide of lost jobs due to trade,” said Leo Gerard, president of United Steelworkers. “Despite many promises, workers are still waiting for a new approach.”
The overall U.S. trade deficit in goods and services with the rest of the world climbed to $566 billion last year, a 12.1 percent increase over the previous year and the highest in nine years.
“This is the widest now since the recession,” said economist Chris Rupkey of MUFG Union Bank. “Worse than Obama's second term in office. Trump's trade team has not been able to stem the flood of imports into the country yet.”
Economists say that stronger U.S. economic growth last year enabled U.S. consumers to buy more imported cars, appliances and computers. U.S. exports also rose, aided by the falling dollar, which makes U.S. products less expensive for foreign customers. But the export jump fell short of the increase in imported goods.
Commerce Secretary Wilbur Ross acknowledged that the improved economy fueled the widening gap, but he insisted that the president will eventually reduce the deficit through tougher enforcement and new trade deals.
“The president’s initiatives inherently take time to come to fruition,” he told reporters while visiting Florida's Kennedy Space Center. “It will take a little time to take effect.”
The widening gap will probably increase pressure on the president to fulfill his repeated promises to take tough action against China and other U.S. trading partners. The United States also incurred deficits last year in its trade with the European Union ($151.4 billion), Mexico ($71.1 billion) and Japan ($68.8 billion).
Trump says he wants trade relations to be “fair and reciprocal” and frequently cites the U.S. deficit with individual countries as proof that they are treating Americans unfairly. Administration officials are weighing possible actions against China over its handling of intellectual property and its general moves to reduce surging imports of steel and aluminum.
Some trade experts worry that more aggressive U.S. measures will ignite a tit-for-tat cycle of retaliation.
“They raise the already high risk of new U.S. tariffs on Chinese imports, almost certainly to be quickly followed by a carefully targeted Chinese response,” said economist Mary Lovely of the Peterson Institute for International Economics. “Unfortunately, while destructive of jobs both here and in China, these responses will not move the needle on the U.S. trade deficit.”
So far, however, the president’s actions have fallen short of his rhetoric.
Upon taking office one year ago, he withdrew the United States from a Pacific trade deal and called for the 24-year-old North American Free Trade Agreement to be renegotiated. Earlier this year, he imposed tariffs on imported solar panels and washing machines.
“Right now, the same trade policy that Trump attacked ferociously and promised to speedily replace is still in place,” said Lori Wallach, director and founder of Public Citizen's Global Trade Watch. “The first-year Trump jump in the U.S. trade deficit adds urgency to the administration actually securing a NAFTA replacement deal that ends NAFTA’s job outsourcing incentives and implementing a new China trade policy.”
On Wednesday, several Republican members of the Senate Finance Committee are scheduled to meet with the president to press him on trade policy, including his NAFTA plans, according to the White House.
Christian Davenport contributed to this report.