There is a lot of talk about the US trade deficit with other nations. It does not fundamentally matter because the US currency is the world’s reserve currency, and while it is true that other nations can call their credits with the US, all the US has to do is declare insolvency and as she is THE currency, her creditors cannot collect on their claims ever, and any crash in the economy would be blamed on them. It is a wickedly clever way of essentially ripping people off.
That said, it is of note for the record that many will point to as a sign of “increasing” economic power, but not in reality, that the US trade deficit under Trump is the lowest that it has been in six years.
The U.S. trade deficit fell for the first time in six years in 2019 as the White House’s trade war with China curbed the import bill, keeping the economy on a moderate growth path despite a slowdown in consumer spending and weak business investment.
The report from the Commerce Department on Wednesday also showed the Trump administration’s “America First” agenda decreased the flow of goods last year, with exports tumbling for the first time since 2016. President Donald Trump, who has dubbed himself “the tariff man,” has pledged to shrink the deficit by shutting out more unfairly traded imports and renegotiating free trade agreements.
Trump has argued that substantially cutting the trade deficit would boost annual economic growth to 3% on a sustainable basis. The economy has, however, failed to hit that mark, growing 2.3% in 2019, which was the slowest in three years, after expanding 2.9% in 2018.
The trade deficit dropped 1.7% to $616.8 billion last year, declining for the first time since 2013. That represented 2.9% of GDP, down from 3.0% in 2018. Goods imports tumbled 1.7% last year amid steep declines in industrial materials and supplies, consumer goods and other goods. The 1.3% drop in exports was led by decreases in shipments of capital goods, industrial supplies and materials, as well as other goods.
At the height of the U.S.-China trade war last year, Washington slapped tariffs on billions worth of Chinese goods, including consumer products, leading to a decline in imports.
The politically sensitive goods trade deficit with China plunged 17.6% to $345.6 billion in 2019. (source)
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