Trade Deficit Was Trump’s Priority
Getting the trade deficit down was a high priority for President Trump. It has not happened. In the year before his inauguration the deficit was $481bn (£372bn in current figures). In 2019 – the most recent full year and one in which economic activity was not yet distorted by the pandemic – it was $577 bn. That was slightly lower than the year before but it was still well above the level he inherited.
A growing economy does tend to do more trade, so how does the deficit look in comparison to the size of the economy, GDP? Taking a slightly wider measure, the current account deficit (which adds in some financial flows including money sent home by foreign nationals) last year’s figure of 2.2% was little changed from 2016.
The trade war with China did lead to a decline in the bilateral deficit last year as imports fell more than exports. But that was partly offset increases in goods coming from many other countries. It is another question whether a trade deficit of that scale matters as much President Trump thinks it does or whether trade policy can reduce it much.
Many – though not all – economists think it is not such a problem, and many say that a deficit is not the result of other countries trading unfairly – it is what you get when a country saves less than it invests.
