U.S. trade deficit surges to 10-year high thanks to strong economy

President Donald Trump’s war on the trade deficit isn’t going as planned. In fact, he is losing this battle because the trade gap is ballooning under his watch.

According to the latest Bureau of Economic Analysis (BEA) data, the trade deficit was $621 billion in 2018, the highest it has been since 2008 when it was $709 billion. This is also up $552.3 billion from 2017. The trade deficit took the biggest hit in December when it rose 18.8 percent.

How are the deficits going with China, Europe, and Mexico? Despite these trade spats, the deficit soared to an all-time high with these jurisdictions. With Beijing, for instance, the U.S. ran a $419 billion deficit in goods, up 12 percent from the previous year.

This comes as the goods trade deficit increased $10 billion to an all-time high of $91.6 billion in December.

So, what’s the story?

MarketWatch has an interesting take:

Rising wages and the lowest unemployment rate in decades enabled Americans to buy more goods and services, including imports. A strong dollar also made foreign goods cheaper for Americans to buy.

On the flip side, the strong dollar made U.S. goods more expensive while slower economic growth in Europe, Japan and China curbed demand for American-made products.

The White House may have unwittingly contributed to higher deficits.

For one thing, the Trump tax cuts supercharged consumer spending in 2018, leading Americans to spend even more on imports. And the tariffs imposed by the White House may have contributed to higher deficits by spurring American companies to speed up purchases of foreign goods before tariffs took effect.

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The bigger trade gap may have prevented the economy from reaching 3% GDP in 2018 for the first time since 2005, a goal of the Trump administration that would have provided the president with a symbolic victory. GDP rose 2.9% last year.

Why do we care about trade deficits?