Economy

The US trade deficit decreased 1.7% past year to $ 616.8 billion

The US trade deficit decreased 1.7% past year to $ 616.8 billion”

Trump has pledged to pledge to alleviate the massive and persistent U.S. trade deficits, which he sees as a sign of economic weakness and the result of unilateral trade agreements that disadvantage USA exporters.

President Donald Trump, who has dubbed himself "the tariff man", has pledged to shrink the deficit by shutting out more unfairly traded imports and renegotiating free trade agreements. Data for November was revised to show the gap tightening to $43.7 billion instead of $43.1 billion as previously reported.

Both imports, which Trump has hit with tariffs, and U.S. exports, which have been hurt by other country's retaliatory tariffs, fell in 2019.

But the goods trade deficit with Mexico jumped to a record high of US$101.8 billion previous year.

In December, the overall trade gap widened 11.9% to $ 48.9 billion as exports increased 0.8% to $ 209.6 billion and imports increased 2.7% to $ 258.5 billion rose.

Excluding services, the U.S. deficit in goods fell by almost $20 billion to $866 billion past year, as imports of Chinese products hit by Trump's punitive tariffs dropped 17.6%, according to the report.

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The trade deficit dropped 1.7% to $616.8 billion a year ago, declining for the first time since 2013.

The Phase 1 agreement, signed on January 15 and taking effect on February 15, suspended a new round of USA tariffs in exchange for the Chinese purchases of agricultural, energy and manufactured goods and services. The deficit with the European Union also reached an all-time high of $177.9 billion.

Trade added nearly 1.5 percentage points to GDP growth in the fourth quarter, exceeding the 1.20 percentage points contribution from consumer spending, which accounts for more than two-thirds of USA economic activity. Imports of crude oil plunged 19.3% to $126.6 billion. "[Tariffs] increase costs for consumers, they make us less competitive [and] they take away money from shoe companies and retailers that could be invested in other capital investments".

Economists believe a 15% tariff on US$110 billion worth of Chinese goods that came into effect on Sept 1 had weighed on imports in the prior months. It tumbled 17.6% to US$345.6 billion in 2019. Imports decreased $12.5 billion or 0.4%.

"The trade war hit to business capex and especially the imposition of tariffs on an array of Chinese consumer goods on September 1 are likely to blame for the import collapse", Ian Shepherdson of Pantheon Macroeconomics said in an analysis.



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