WASHINGTON: The US trade deficit increased to a more than nine-year high in January, with the shortfall with China widening sharply, suggesting that President Donald Trump’s “America First” trade policies aimed at eradicating the deficit will likely fail.
The trade gap continues to widen a year into the Trump presidency. Trump, who claims that the United States is being taken advantage of by its trading partners, has imposed tariffs on imports of some goods and threatened punitive measures on others to shield domestic industries from competition. The protectionist measures have sparked fears of a trade war.
The Commerce Department said on Wednesday the trade deficit jumped 5.0 per cent to $56.6 billion. That was the highest level since October 2008 and exceeded economists’ expectations of an increase to $55.1 billion. Part of the rise in the trade gap in January reflected higher commodity prices.
The politically sensitive goods trade deficit with China surged 16.7 per cent to $36.0 billion, the highest since September 2015. The deficit with Canada soared 65 per cent to a three-year high of $3.6 billion. China and Canada are the United States’ top trading partners.
Trump in late January imposed broad tariffs on imported solar panels and large washing machines. Last week, Trump announced he would slap import tariffs of 25 per cent on steel and 10 per cent on aluminium to protect domestic producers.
According to a Reuters survey of economists, nonfarm payrolls probably increased by 200,000 jobs last month, matching January’s gains. The unemployment rate is forecast falling one-tenth of a percentage point to 4.0 per cent, which would be the lowest level since December 2000.
The surge in the January trade deficit was flagged by an advance goods trade deficit report last week. When adjusted for inflation, the trade deficit increased to $69.7 billion from $68.5 billion in December. The economy grew at a 2.5 per cent annualised rate in the fourth quarter. Growth estimates for the first quarter are around a 2.0 per cent pace.
In January, exports fell 1.3 per cent to $200.9 billion, weighed down by a $1.8 billion drop in civilian aircraft. Crude oil exports also declined. But exports of consumer goods rose to a record high and those of motor vehicles, parts and engines were the highest since July 2014.
Exports to China tumbled 28.1 per cent. Imports were unchanged at $257.5 billion in January amid a $1.3 billion drop in cellphone imports as well as a $0.9 billion decrease in civilian aircraft. Crude oil imports increased by $2.2 billion, reflecting higher prices. Imports from China rose 2.9 per cent.
A third report from the Labour Department showed worker productivity flat in the fourth quarter instead of declining at a 0.1 per cent rate as reported last month. Sluggish productivity could make it difficult for the Trump administration to achieve its 3 per cent growth target.
Annual economic growth has not surpassed 3 per cent since 2005. Gross domestic product expanded 2.3 per cent in 2017. — Reuters