The U.S. trade deficit jumped to its highest level in 10 years, according to a U.S. Department of Commerce report on Wednesday. Despite President Donald Trump’s repeated promise to shrink trade deficits, it leaped by 12.2% to $621 billion in 2018, after hitting a record high during his first year in office. Although the strengthening dollar and slowing economic growth in some regions contribute to the widening deficits, the record number may also partly be the president’s own making— thanks to the trade tension he started with major trading partners including China and the Tax Cuts and Jobs Act passed in 2017. The real goods deficit in December reached $91.6 billion — its highest level since 1994. The recent widening in the deficit has been driven in part by weakening exports, according to Daniel Silver, an economist at JPMorgan. Nominal goods exports to China tanked by 33% year-over-year in December, likely as a result of China’s retaliatory tariffs on U.S. goods. The U.S. and China have been going through months of tough negotiations, during which Trump vowed to reduce the trade deficit between the world’s two largest economies. It’s reported that both sides are close to reaching a deal that could include China’s purchase of more than $100 billion worth of U.S. goods every year, including agricultural and energy products. The tax cuts may also contribute to the jump in trade deficit. Derek Scissors, resident scholar at American Enterprise Institute calculates the tax cuts could boost the trade deficit by $200 billion.
