The U.S. trade deficit a year ago has surged to the highest level since 2008, according to a report by U.S. Commerce Department Wednesday.
His trade war with Beijing also widened the gap: Stiff tariffs on Chinese goods helped slow China's economy, crimping American exports, which declined almost 50 per cent in December from the same month a year before.
For 2018 as a whole, the deficit grew to $621 billion - the highest since 2008, the Commerce Department said Wednesday.
For goods only, the USA deficit with the world surged to a record US$891.3 billion in 2018 from US$807.5 billion the prior year.
The US trade gap with the rest of the world widened to $621bn (£472.5bn) a year ago, dealing a blow to President Donald Trump's deficit reduction plan.
Donald Trump imposed tariffs a year ago on foreign steel, aluminum and Chinese products in the belief that these import taxes would ultimately reduce the trade imbalance. Of that $621 billion chasm - up $119 billion from 2016 - most came from US money going for Chinese goods.
"If you want to lower the trade deficit, have a recession", said Reinsch. Summers, along with other economists, has also challenged Trump's approach to addressing the perceived problem by adding tariffs, pointing out that these levies primarily negatively affect USA consumers. Trump has previously acknowledged Japan's trade surplus with the USA, though prior to this week he had done little to concretely address the issue. Beijing's longstanding policy of subsidizing its own businesses and charges that it illicitly obtains USA technology remain key obstacles.
The dollar is now valued 19 per cent above its 10-year average against the currencies of major United States trading partners, according to Federal Reserve data.
US trade deficit hits 10-year high as Trump trade wars backfire
Weinstein said the President appears to be relying on a 2018 analysis of data from the 1990s, when the U.S. represented a larger share of the global economy and enjoyed more leverage over exporters in other countries.
President Trump's America First policies are not having their intended effect. As consumers increased their spending, purchases of imported goods rose while the overvalued dollar weighed on exports.
The US is now locked in a trade battle with China over what it claims are unfair trade practices, resulting in tit-for-tat tariff increases on each others' goods.
Between 2017 and 2018, USA exports to China dropped by more than $9 billion, while its imports from China rose by more than $34 billion. A trade deficit reducing tariff would have to be much higher, perhaps even exceeding the 25 percent that was supposed to apply two months ago.
Trump has pledged that once his brilliantly negotiated deals go through - the new North American Free Trade Agreement gets ratified by Congress, China fully capitulates to all his wildest demands, the European Union and Japan suddenly decide to buy more of our cars, etc. - our balance of trade will turn around. He said trade talks were "moving along nicely".
"We find that the USA tariffs were nearly completely passed through into USA domestic prices, so that the entire incidence of the tariffs fell on domestic consumers and importers up to now, with no impact so far on the prices received by foreign exporters", according to the report. "When things are booming we consume more imports".
"Many Pennsylvania farmers and manufacturers have already been harmed by tariffs".
A study by economists at the New York Federal Reserve, Columbia University and Princeton University found that the trade war is costing consumers and companies $3 billion per month in added tax costs.
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