Capitol Report: Trump can’t hurdle this Great Wall — another record trade deficit with China
The U.S. trade deficit is going to finish Donald Trump’s first year in office at the highest level in five years despite the president’s vow to bring it down. And the gap with China is likely to be the biggest ever.
That’s just a taste of how difficult it will be for Trump to do what the previous six presidents going back to Jimmy Carter have failed to accomplish.
The U.S. trade deficit rose 3.2% in November to $ 50.5 billion and hit the highest level since January 2012.
What’s more, the trade deficit with China is likely to set another record in 2017, surpassing the previous peak two years ago.
Read: Why even a Trump victory in China talks won’t dent the trade deficit
Disappointing news? No doubt. Higher than expected deficits in October and November could put a dent in the official measure of U.S. growth, known as GDP. Economists had thought gross domestic product could exceed 3% for the third quarter in a row for the first time since 2005.
Now it looks like fourth-quarter GDP will fall short.
The higher deficit stems from several factors beyond the president’s immediate or direct control. Two of the biggest culprits in 2017, for example, are a weaker dollar and higher oil prices.
Take the weak dollar, whose value has dropped almost 8% in the past year. When its value falls, Americans have to pay extra to buy foreign goods such as Stilton cheese, French wine, German Volkswagens or Japanese TVs.
The price of oil, meanwhile, has surged in 2017 to an average price of $ 45.47 a barrel from $ 36.09 in 2016 — a 26% increase.
A larger trade deficit is not always a bad sign, however. What is also reflects is a strong U.S. economy that allows Americans to buy more stuff. The nation is in its ninth year of expansion and the unemployment rate is at a 17-year low of 4.1%.
The improved purchasing power of Americans is evident in the consumption of cell phones and other popular consumer goods now made largely in China.
For the first time the U.S. is on track in 2017 to import more than $ 100 billion in “cellphones and other household goods.” About half of those sales are tied to mobile devices such as the newest iPhones, iPads or Galaxys.
The U.S. also imports gobs of computers, televisions, clothes and furniture from China, products rarely made in America anymore.
Read: How Chinese imports may have curbed American ingenuity
Trump has vowed to bring American companies back home and rebuild the U.S. as a manufacturing center, a strategy underlying the recent passage of the biggest corporate tax cuts since 1986.
Yet even if the president were to succeed, the U.S. is going to be reliant on Chinese-made goods for a long time.