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US Trade Deficit Spikes to 10-Year High

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Counting newly released data for the month of December, the total US trade deficit rose to a staggering $621 billion, a high not seen since 2008. December’s monthly trade deficit jumped to $59.8 billion, a 19 percent increase from November.

The increase in America’s trade deficit comes despite attempts by the Trump administration to make American goods more competitive domestically through the application of import tariffs. While the administration has imposed tariffs most specifically on Chinese goods, the overall trade deficit with China expanded to $419 billion for the year. The tariffs imposed last year were initially planned to be expanded at the beginning of 2019, but trade talks prompted an extension. As of the time of this writing, American and Chinese trade representatives are still in negotiations for a new exchange framework between the two countries.

Although economists expected the trade deficit to rise in December, few expected it to increase to the degree it did. Initial estimates suggested a December deficit of $57.3 billion. However, a variety of factors are currently putting upward pressure on America’s trade deficit with the rest of the world. A slowing rate of global growth, combined with a stronger than usual dollar, have made American exports less attractive to foreign consumers. The tax cuts that went into effect last year have also spurred domestic spending, increasing the American appetite for consumer goods produced largely overseas.

The $621 billion metric combines the deficits for both goods and services. In terms of the deficit on goods alone, the trade deficit was $891.3 billion, by far the highest ever recorded. Services are typically more competitive in the international market due to their lack of physical inputs.

Despite the unexpected expansion of the trade deficit, markets were more or less stable on Wednesday morning. Market indices were down only slightly, and investors were more or less optimistic about the pending results of America’s trade talks with China.

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