Market Overview

US Trade Deficit Hits 10-Year High

US Trade Deficit Hits 10-Year High

One of the primary factors weighing on the market in the past year has been fear over the ongoing international trade war, particularly with China. President Donald Trump has repeatedly cited the U.S. trade deficit with China as grounds for the trade war.

Unfortunately for Trump and other Americans, the latest data from the Commerce Department out Wednesday revealed the U.S. trade deficit is at its highest level since 2008.

The Numbers

On Wednesday, the Commerce Department reported the December U.S. trade deficit was $59.8 billion, up from $50.3 billion in November. The number exceeded consensus economist predictions of $57.3 billion.

The latest news comes after China announced in January that its 2018 trade surplus with the United States was $323.32 billion, its largest in at least the last 12 years, CNBC said, citing Reuters. 

For the full year, the U.S. trade deficit increased 12.8 percent in 2018 to $621 billion, its highest level since 2008. The U.S. trade deficit with China, the target of Trump's trade war, reached $38.7 billion in December, by far the largest of any U.S. trading partner.

Trade War Impact

Trump has imposed tariffs on steel, aluminum, solar panels and other goods imported from China and other trading partners in an effort to reduce the U.S. trade deficit. The tariffs make Chinese imports more expensive for U.S. consumers, theoretically leveling the playing field for domestic companies.

Unfortunately, as the 2018 numbers suggest, Trump seems to be losing the trade war.

The lackluster results of the trade war may be one of the reasons Trump recently softened his stance on ramping up tariffs on China starting Jan. 1 and extended a second deadline that was set for March 1. The chart below highlights how the trade war has impacted the overall U.S. trade balance on a monthly basis throughout the past year:

United States Balance Of Trade

Fortunately for investors, the U.S. stock market seems to be pricing in an end to the trade war in the near future. The SPDR S&P 500 ETF Trust (NYSE: SPY) is up 11.3 percent year-to-date.

Related Links:

The US Trade Deficit, Explained

Fed Chair Powell: 'We Are Prepared To Adjust'


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