U.S. and China flags side by side Gil-Design/Thinkstock

Trump can't contain ballooning trade deficit with China

The U.S. trade gap in goods with the Asian power surged 8.1% last year to a record $375 billion.

by Andrew Mayeda and Shobhana Chandra

Try as he might, President Donald Trump can’t contain America’s ballooning trade deficit with China. 

The U.S. trade gap in goods with the Asian power surged 8.1% last year to a record $375 billion, according to Commerce Department data released Tuesday. The total goods deficit with all nations swelled by the same percentage to $796 billion. 

Trump has repeatedly complained about America’s trade deficit with China, expressing his disappointment with the growing shortfall in a recent phone call with President Xi Jinping. The U.S. president has threatened a host of actions to constrain China, including tariffs on imports of steel and aluminum and penalties for misuse of American intellectual property. 

In his first State of the Union address last week, Trump said the “era of economic surrender is over” and promised to negotiate better trade deals, and he named China an economic rival. China stoked tensions this week by starting an anti-subsidy and anti-dumping probe into grain sorghum from the U.S. 

Rank    Country            2017                2016           2016 rank

1          China               $375 billion     $347 billion    1

2          Mexico            $71.1 billion    $64.4 billion    4

3          Japan               $68.8 billion    $68.8 billion    2

4          Germany         $64.3 billion    $64.7 billion    3

5          Vietnam          $38.3 billion    $32 billion       6

6          Ireland             $38.1 billion    $36 billion       5

7          Italy                 $31.6 billion    $28.6 billion    7

Some economists say it will be tough to reverse the trade imbalance with China without deep reforms that change the balance between investment and saving in each country. Republican-backed tax cuts passed late last year may exacerbate the trade shortfall by boosting the dollar, making U.S. exports more expensive, and by stoking domestic demand, which would also spur imports.

In 2017, the U.S. had record imports from 47 countries, led by China. American exports to China rose to an all-time high of $130 billion, from $116 billion the previous year, although it wasn’t enough to prevent the deficit from growing. 

Last year’s trade totals aren’t likely to soften the U.S. position on the North American Free Trade Agreement. The goods deficit with Mexico increased by 10% to $71.1 billion, causing the country to leapfrog Germany and Japan into second place, behind China. The goods gap with Canada surged about 60% to $17.6 billion, as America’s northern neighbor rose from 16th to 12th place. Negotiators from the U.S., Mexico and Canada wrapped up their sixth round of talks on a new NAFTA last month with modest signs of progress. 

However, the U.S. goods deficit with South Korea narrowed 17% to $22.9 billion, dropping the Asian nation to 10th place from 8th. The U.S. is also renegotiating its 2012 free-trade deal with South Korea. The Trump administration is demanding changes to improve access for U.S. exports, including automobiles.

--With assistance from Chris Middleton.

To contact the reporters on this story: Andrew Mayeda in Washington at [email protected]; Shobhana Chandra in Washington at [email protected]

To contact the editors responsible for this story: Brendan Murray at [email protected]

Sarah McGregor, Scott Lanman

© 2018 Bloomberg L.P 

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