America’s Trade Deficit In Goods Hits Record High

In spite what you may have heard, President Trump’s “America First” trade policy with China isn’t closing the trade deficit:

“WASHINGTON — America’s trade deficit in goods with the rest of the world rose to its highest level in history last year as the United States imported a record number of products, including from China, widening the deficit to $891.3 billion and delivering a setback to President Trump’s goal of narrowing that gap.

The increase was driven by some factors outside Mr. Trump’s control, like a global economic slowdown and the relative strength of the United States dollar, both of which weakened overseas demand for American goods. But the widening gap was also exacerbated by Mr. Trump’s $1.5 trillion tax cut, which has been largely financed by government borrowing, and the trade war he escalated last year.

It is a case of textbook economics catching up with some of Mr. Trump’s unorthodox economic policies. Economists have long warned that Mr. Trump’s tax cuts would ultimately exacerbate a trade deficit he has vowed to reduce, as Americans, flush with extra cash, bought more imported goods. …”

The Trump tax cuts are largely to blame, not the tariffs:

“The relative strength of the United States economy is also a large factor in the widening deficit, along with the $1.5 trillion tax cut Mr. Trump signed in 2017, which accelerated growth last year.

Money from the tax cuts helped Americans buy more imported goods than ever in 2018. And to finance the tax cuts, the government needed to borrow more dollars, some of which came from foreign investors. Foreigners primarily get those dollars by selling more goods and services to Americans, which will necessarily widen the trade gap, an effect that many economists predicted at the time Mr. Trump signed the tax cuts. …”

Americans are now going into debt to China to finance their global industrial dominance at a faster rate than ever before.