- The US trade deficit hit $55.5 billion in October, the highest since October 2008.
- The increase in the deficit came due to continued growth in imports, while exports actually fell.
- The trade deficit with China also hit a record level.
- One of President Donald Trump's goals for the trade war was to reduce the trade deficit, but the president's own policies are likely prompting some of the widening gap.
Shrinking the US trade deficit has been a key goal of President Donald Trump's trade war.
But the Census Bureau announced Thursday that the US trade deficit grew to $55.5 billion in the month of October, the highest in exactly 10 years. That was a 1.7% jump from September, as imports rose by 0.2% and exports fell by 0.1%.
Trump has long been focused on the trade deficit as a signal that his administration's tariffs on Chinese good and metals are working, despite the fact that most economists discount the measure as a sign of effective trade policy.
Looking at the main target of the trade war, China, the trade deficit was similarly dismal. The unadjusted goods trade deficit hit $43.1 billion in October, the highest level ever.
While Trump may not like the results, there are good reasons the trade deficit is expanding. And part of the blame, for better and for worse, lies on the president's own policies.
On the import side of the ledger:
- The US economy is stronger, and US consumers' appetite is outpacing the country's ability to produce the goods they want.
- This means the US needs goods from other countries to satisfy consumer demand, leading to import growth.
- The increase in demand is in part due to the significant amount of fiscal stimulus injected into the economy by Trump's tax cuts and the massive bipartisan budget deal.
- Goosing the economy, while helping Trump claim victories on things like stronger GDP, also means the president's trade report card looks worse.
At the same time, exports are cooling due to retaliatory tariffs on US products: