The United States had the largest trade deficit of its 243-year history last year, despite President Donald Trump’s promise to address the growing gap through “America first” policies that have levied new tariffs against allies and foes.
During a 2016 campaign speech, candidate Trump referred to the trade deficit as a “politician-made disaster,” vowing to change it quickly if elected. “We can turn it all around—and we can turn it around fast,” he said at the time.
Despite Trump’s promise and his efforts to address the trade deficit through increased tariffs, after two years in office, it rose to a record $891.2 billion, The Washington Post reported on Wednesday. The trade gap with China, which has received the brunt of the president’s ire for its “unfair” trade practices, also reached a record high of $419 billion. The previous trade deficit recrod, of $838.3 billion, was in 2006, under President George W. Bush, as the housing bubble peaked.
The president has repeatedly argued that the trade deficit is “unsustainable” and classified it as transferring wealth from the U.S. to foreign countries. He has made reducing the gap a primary component of his economic and foreign policy, launching a multi-billion dollar trade war with China while adding new tariffs to imports from allies in Europe, North America and other countries.
Many economists have pushed back against Trump and his understanding of what a trade deficit means.
“A bilateral balance doesn’t really tell you anything about what the economy is doing,” Scott Lincicome, an adjunct fellow at the libertarian Cato Institute, told The New York Times last year, “just like my bilateral deficit with my grocery store doesn’t tell you anything about whether I’m in debt.”
Lawrence Summers, a Harvard economist and former chairman of President Barack Obama’s National Economic Council, told The Times that “the trade deficit is a terrible metric for judging economic policy.” Summers, along with other economists, has also challenged Trump’s approach to addressing the perceived problem by adding tariffs, pointing out that these levies primarily negatively affect U.S. consumers.
And as economists predicted, several recent studies found that the total amount of money raised from increased tariffs came from U.S. businesses and citizens. Economists from the University of California, Los Angeles; Yale University; and the University of California, Berkeley released the latest draft of an economic study this week that showed that Americans footed the entire tariff bill in 2018. Their research also revealed that workers in many Republican-leaning counties suffered the most economically from Trump’s trade disputes.
“We compute that tradeable real wages fall the most in heavily GOP counties because of the [trade] war,” the study found.