WASHINGTON • The US goods trade deficit surged to a record high last year as strong domestic demand fuelled by lower taxes pulled in imports, despite the Trump administration's "America First" policies, including tariffs, aimed at shrinking the trade gap.
President Donald Trump is pursuing a protectionist trade agenda to shield US manufacturing from what he says is unfair foreign competition. He has pledged to reduce the deficit by shutting out more unfairly traded imports and renegotiating free trade agreements.
The Commerce Department said on Wednesday that a 12.4 per cent jump in the goods deficit in December had contributed to the record US$891.3 billion (S$1.2 trillion) goods trade shortfall last year.
The overall trade deficit surged 12.5 per cent to US$621 billion last year, the largest since 2008.
"The trade deficit exploded last year despite the Trump administration's efforts to make America great again, and the trend is unlikely to get any better in 2019," said Mr Chris Rupkey, chief economist at MUFG in New York.
The White House has argued that reducing the trade deficit would boost annual economic growth to its goal of 3 per cent on a sustainable basis. The government also sought to stimulate the economy with a US$1.5 trillion tax cut package, which jolted both consumer and business spending, helping to lift imported goods to a record US$2.6 trillion in 2018.
The United States last year imposed tariffs on US$250 billion worth of goods imported from China, with Beijing hitting back with duties on US$110 billion worth of American products, including soya beans and other commodities. Mr Trump has delayed tariffs on US$200 billion worth of Chinese imports as negotiations to resolve the eight-month trade war continue.
Surge in overall trade deficit - to US$621 billion last year, the largest since 2008.
Businesses likely stocked up on imports in anticipation of further duties on Chinese goods, which ironically contributed to the deterioration in the trade deficit last year.
The goods trade deficit with China increased 11.6 per cent to a record high of US$419.2 billion last year. The US, which also slapped duties on imported steel, aluminium, solar panels and washing machines, had record imports from 60 countries last year, led by China, Mexico and Germany.
While goods exports hit a record US$1.7 trillion last year, they declined in the last three months of the year, weighed by the US-China trade dispute, slowing global demand and a strong dollar.
A 1.9 per cent drop in exports of goods and services drove the trade deficit in December to US$59.8 billion, the largest since October 2008. Imports of goods and services increased 2.1 per cent to US$264.9 billion in December. When adjusted for inflation, the goods trade deficit surged US$10 billion to a record US$91.6 billion in December.