WASHINGTON: The US trade deficit fell for the first time in six years in 2019 as the White House’s trade war with China curbed the import bill, keeping the economy on a moderate growth path despite a slowdown in consumer spending and weak business investment.
The report from the Commerce Department on Wednesday also showed the Trump administration’s “America First” agenda decreased the flow of goods last year, with exports tumbling for the first time since 2016. 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.
Trump has argued that substantially cutting the trade deficit would boost annual economic growth to 3pc on a sustainable basis. The economy has, however, failed to hit that mark, growing 2.3pc in 2019, which was the slowest in three years, after expanding 2.9pc in 2018.
The trade deficit dropped 1.7pc to $616.8 billion last year, declining for the first time since 2013. That represented 2.9pc of GDP, down from 3.0pc in 2018. Goods imports tumbled 1.7pc last year amid steep declines in industrial materials and supplies, consumer goods and other goods. The 1.3pc drop in exports was led by decreases in shipments of capital goods, industrial and materials, as well as other goods.
At the height of the US-China trade war last year, Washington slapped tariffs on billions worth of Chinese goods, including consumer products, leading to a decline in imports.
The politically sensitive goods trade deficit with China plunged 17.6pc to $345.6 billion in 2019.
The White House has also sparred with other trading partners, including the European Union, Brazil and Argentina, accusing them of devaluing their currencies at the expense of US manufacturers.
The goods trade deficit with Mexico jumped to a record high of $101.8 billion last year. The deficit with the European Union also reached an all-time high of $177.9 billion.
Tensions in the 19-month US-China trade war have eased, with Washington and Beijing signing a Phase 1 trade deal last month. The deal, however, left in place US tariffs on $360 billion of Chinese imports, about two-thirds of the total.
As a result, goods imports rebounded sharply in December, boosting the trade deficit 11.9pc to $48.9 billion that month. Data for November was revised to show the gap tightening to $43.7 billion instead of $43.1 billion as previously reported. Economists polled by Reuters had forecast the trade gap would widen to $48.2 billion in December.
US stock index futures were trading higher while prices of US Treasuries were lower. The dollar was slightly stronger against a basket of currencies.