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US trade deficit climbs to 10-year high

Despite President Donald Trump's tariff policy, the deficit in the US trade balance in December has risen to its highest level in over ten years. As the US Department of Commerce in Washington announced, the negative increased by 9.5 billion to 59.8 billion dollars (52.8 billion euros).

Imports thus outperformed exports in October 2008. The previous month's deficit was revised up by $ 1.0 billion to $ 50.3 billion. The news is likely to displease Trump; for him the topic has long been a big thorn in the eye.

For the full year of 2018, the deficit rose to $ 621 billion, the highest level in ten years. This is a year-on-year increase of 12.5 percent or $ 68.8 billion. That is a slap on the face for the customs policy by Donald Trump.

Recently, higher growth in the US compared to other regions has fueled imports and expanded the deficit. At the same time, US exports were burdened by the high dollar exchange rate and additional duties.

In order to counteract the immense balance of the US trade balance, Trump is particularly on higher tariffs, which make goods from abroad more expensive. For example, the US government vigorously raised the barriers to imports of steel and aluminum. So far, however, this approach has been unsuccessful, as shown by the figures of the Ministry of Commerce.

 

EU Trade Commissioner on reassurance mission in Washington

However, there is little evidence that Trump - who views the high surpluses of other states as a result of "unfair" trade agreements - deviates from his previous line. For example, the US President is threatening to impose further special tariffs that, for example, could soon be imposed on cars from the EU.

The Department of Commerce had submitted a report to the President stating that car imports could affect US national security. On this basis, Trump might be able to impose duties without breaking the rules of the World Trade Organization.

To prevent tariffs, the EU wants to reach an agreement with the US that provides for duty-free treatment of all industrial products. Therefore, Trade Commissioner Cecilia Malmström is in Washington, where she wanted to speak on Wednesday with the US Trade Representative Robert Lighthizer. Among other things, she wants to let him know how far the preparations for official trade talks on the EU side have progressed. So far Malmström has no negotiating mandate from the member states, countries like France and Belgium still want to wait.

Trump criticizes the high trade deficit again and again. To reduce deficits, he puts pressure on large trading partners such as China or the EU, so they import more from the US. Nevertheless, the deficit with China in 2018 rose to a record $ 419.2 billion. Economists are of the opinion that the chronic trade deficit is mainly the result of consistently high consumption and savings in the US.

A key reason for the widening of the deficit in the past year experts also see in Trump's tax reform. Lower taxes to the Treasury left businesses and consumers with more money, which should also boost demand for imported goods.