Why Is the U.S. Trade Deficit Still So High?

Trade cargoOn the campaign trail, President Donald Trump promised to bring the country’s gaping trade deficits to lower levels by changing U.S. trade policies. After one year of presidency though the trade deficit is still record high.

On Tuesday, The Commerce Department announced that the nation’s trade deficit got even wider by 12%. The $566-billion U.S. deficit is now the largest since 2008. Experts explained that the imports ($2.9 trillion) were bigger than exports ($2.3 trillion) which led to the current situation.

The trade deficit with China currently stands at $375.2 billion, while the trade deficit with Mexico increased $71.1 billion. The White House has often accused China of unfair trade practices.

Trade Deficit on the Rise

Chris Rupkey of the Union Bank explained that he President’s trade team has failed to curb the number of imports as promised. It is worth noting that the trade deficit climbed even though the U.S. dollar lost some of its value in 2017, which means that the goods and services offered by U.S. companies were cheaper than those offered by companies in Europe.

Plus, a weak dollar makes imports costlier for the U.S. market. But experts at the Center for Economic and Policy Research explained that a weaker dollar requires time before it can have a say on the trade balance.

Commerce Secretary Wilbur Ross promised to reduce the trade gap via a mix of new trade deals and a ban on illegal trade practices. In January, the federal government slapped foreign washing machines and solar panels with a heavy tariff that would be phased out over the next few years.

The worst impacted were the imports from China and South Korea. Ross couldn’t offer an “exact deadline” for the remedy of the U.S. trade gap.
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