US trade gap surges to a 10-year high at US$621 billion, including a record deficit with China

The US trade deficit jumped nearly 19 per cent in December, pushing the trade imbalance for all of 2018 to widen to a decade-long high of US$621 billion. The gap with China on goods widened to an all-time record of US$419.2 billion.

The Commerce Department figures released on Wednesday undermined a key commitment by US President Donald Trump, who promised to cut the trade imbalance on the belief that it would bring back overseas factory jobs and bolster the broader US economy.

But America’s appetite for imports appears to have increased after the tariffs that Trump imposed last year on foreign steel, aluminium and Chinese products.

The greater reliance on Chinese imports likely reflects an acceleration in economic growth last year from Trump’s debt-funded tax cuts, which were designed to increase spending by consumers and businesses.

The gap between what the United States sells and what it buys from other countries rose to US$59.8 billion in December from US$50.3 billion in November, the Commerce Department said. Adjusted for inflation, December was the highest imbalance on trade goods in US history.

Stephen Stanley, chief economist at Amherst Pierpont Securities, suggested that the trade gap climbed so quickly because importers were rushing to bring their goods into the United States before a planned expansion of tariffs Chinese products on January 1. But the tariff hikes have since been postponed as the administration has cited progress in trade talks with China.