- The Washington Times - Wednesday, March 6, 2019

The U.S. trade deficit grew more than 12 percent to $621 billion last year, in a setback for the centerpiece of President Trump’s “America First” agenda.

While Mr. Trump has made reducing trade deficits a key part of his international and economic policies, the trade gap in goods rose to a record high of $891.3 billion, up from $807 billion in 2017, the Commerce Department reported Wednesday.

The report showed record deficits with China, Mexico and Europe, despite a wave of Trump tariffs on Chinese imports and on steel and aluminum from other countries.

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The trade imbalance on merchandise was offset partly by a $270 billion surplus in U.S. services such as finance and intellectual property.

The deficit with China rose to $419.2 billion in goods last year, up nearly 12 percent from the previous year. Mr. Trump is expected to meet with Chinese President Xi Jinping this month in Florida to finalize a trade deal and potentially conclude a yearlong tariff war with Beijing.

“There’s either going to be a good deal or it’s not going to be a deal,” Mr. Trump said Wednesday of the negotiations. “But I think they’re moving along very nicely.”

The worsening U.S. trade position was partly out of Mr. Trump’s control, caused by a strong dollar and a global economic slowdown that weakened demand for American exports.

But the largest overall trade deficit in 10 years was glaringly inconsistent with the president’s oft-stated goal to reduce trade imbalances and give American workers a level playing field for their products. Mr. Trump has repeatedly pointed to trade deficits with countries such as Mexico and South Korea as proof that the U.S. is being cheated, mainly because of what he calls the incompetence of previous presidents.

In March 2018, Mr. Trump tweeted that “trade wars are good, and easy to win.” But since the start of his presidency, the trade deficit has climbed about $100 billion.

Democrats quickly reminded voters of Mr. Trump’s promise to reduce trade deficits that he blamed on previous administrations.

House Majority Leader Steny H. Hoyer, Maryland Democrat, said the big jump in the trade deficit “shows that the president has flunked the test he set for himself.”

“During the campaign, Donald Trump claimed that large trade deficits represented failed leadership and flawed trade policies,” Mr. Hoyer said. “Now, after two years in office, President Trump’s economic policies have produced the largest trade deficit in American history — by a wide margin. It is time for President Trump to acknowledge that his scattershot approach to trade policy is failing and explain how he intends to change course and reverse these record deficits.”

The trade report, which was delayed by the partial government shutdown, was released the same day that General Motors closed its Chevy Cruze plant in Lordstown, Ohio, laying off 5,400 workers. Rep. Marcy Kaptur, Ohio Democrat, said economists have blamed Mr. Trump’s tax cuts for the worsening trade picture, and she noted that the Cruze will continue to be built in China, South Korea, Mexico and Argentina.

“President Trump made a promise that manufacturing jobs would flow back into the industrial Midwest and wages would rise like never before,” she said. “Instead, President Trump has not only failed to uphold that promise, his policies have directly led to an explosion in the national trade deficit, manufacturing plants shutting down, and wages literally getting cut in half.”

Peter Navarro, director of the White House trade policy council, said the administration has rapidly turned around a broken trade system that it inherited.

Writing in the New York Post, he pointed to a doubling of International Trade Commission investigations into foreign subsidies, leading to U.S. tariffs.

Mr. Navarro also said the Chinese government “is finally engaging in serious negotiations to address cyber intrusions into our business networks, intellectual property theft, forced technology transfer, currency practices and excessive subsidies for state-owned enterprises.”

He noted that U.S. manufacturers added 284,000 jobs last year, the largest increase in 21 years.

“Our nation is growing faster than any other G-7 country and generating new opportunities for America’s blue-collar workers and middle-class families,” he said.

Aggressively implementing his “America First” trade policies, Mr. Trump has imposed tariffs on imported goods, especially from China and the European Union, saying the action would boost American manufacturing jobs. Goods subject to those tariffs included imported steel and aluminum.

The president also has renegotiated the 1994 North American Free Trade Agreement with Canada and Mexico, which Congress still needs to approve.

Pending a trade agreement with Beijing, Mr. Trump has delayed a scheduled increase in tariffs on $200 billion worth of Chinese imports. Chinese officials have pledged to ramp up their purchases of U.S. agricultural products, including soybeans, as a sign of goodwill as they near a comprehensive deal that has been the subject of talks for more than a year.

“Tariffs Hurt the Heartland,” a nationwide campaign, released a report Wednesday showing that Americans paid $12.8 billion in additional tariffs last year.

The report also said U.S. exports of products subject to retaliatory tariffs in December fell by $4.2 billion, or 40 percent, from the previous year. Overall, exports in 2018 dropped by $15.7 billion, or 14 percent, the group said, citing Census Bureau data. But U.S. exports of products not subject to retaliation increased by $119.2 billion, or 10 percent.

“This data shows the trade war has done lasting damage to the American economy,” said former Rep. Charles Boustany of Louisiana, a Republican who is the campaign’s spokesman. “Regardless of what comes of negotiations, punishing ourselves by taxing our own businesses and consumers with tariffs has been a clear mistake. The $12.8 billion paid in tariffs is money out of Americans’ pockets, and when it’s combined with billions in exports lost to retaliation and billions more that was never invested because of business uncertainty, the staggering cost of the trade war begins to sink in.”

Lori Wallach, director of Public Citizen’s Global Trade Watch, urged Mr. Trump to “focus on addressing the root causes by securing a China trade deal that’s not about short-term soy and gas sales but addresses structural issues fueling the deficit” and to work with congressional Democrats to improve NAFTA, which has been renamed the U.S.-Mexico-Canada Agreement.

“The growth of the trade deficit is accelerating in part because of early enactment of government policies like Trump’s tax package that incentivized production and job outsourcing while the major trade reforms are just now coming to a head,” she said.

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