Trump promised to shrink the trade deficit. Instead it exploded

Senior White House economic adviser Larry Kudlow speaks during a briefing at the White House in Washington

Senior White House economic adviser Larry Kudlow speaks during a briefing at the White House in Washington

Reducing the gap is a key plank of Mr Trump's policies.

The President has used similar studies to impose tariffs on steel and aluminum and has threatened to apply them to imported cars and auto parts.

Also, the dollar strengthened against other currencies in the latter part of 2018, making foreign goods more affordable for Americans.

Businesses likely stocked up on imports in anticipation of further duties on Chinese goods, which ironically contributed to the deterioration in the trade deficit past year.

President Donald Trump regularly declares that he's winning his trade wars. The dollar's climb was partly due to a series of rate hikes by the Federal Reserve.

The Trump administration has played up the likelihood of a deal, hinting that a resolution that might provide tariff relief could come within weeks.

The Fed said slowing global growth and the government shutdown weighed on the USA economy at the start of the year but that it continued to grow.

"If you want to lower the trade deficit, have a recession", said Reinsch.

There are competing forces inside the Trump administration that are debating how wise it would be to lift the duties on the first day of a deal because keeping some of the tariffs in place would allow the United States to maintain leverage.

Despite the name, trade deficits tend to have less to do with trade policy than broader macroeconomic policy. He's now pursuing separate deals with China and the European Union. But it's too early to say what effect - if any - those agreements will have on the deficit.

Put another way, by Trump's own benchmark, the USA is 20% worse off than it was at the end of 2016, just before he took office.

That was offset by the gains from protectionism derived by US producers benefiting from the tariffs, the economists found.

Weinstein said the President appears to be relying on a 2018 analysis of data from the 1990s, when the USA represented a larger share of the global economy and enjoyed more leverage over exporters in other countries.

At the same time, the United States recorded surpluses with Britain and with South and Central America.

Some US demands are "just nitpicking", he said.

"Many of the conditions we are negotiating now are also what we need to do in reform and opening up".

A prospective deal can't put all the burden of proof that agreements are being carried out on Beijing, former Chinese officials with experience of dealing with the U.S. have said, warning that the "strong enforcement language" Trump has pledged will be seen as unfair unless it also binds the U.S. to address China's own grievances. If the tariffs continue, about US$165 billion worth of trade would be redirected each year, they added. If the tariffs led to the creation of 35,000 new manufacturing jobs - equal to all the steel and aluminum jobs lost in the past decade - they would cost US$195,000 per job, the study found. "It's pretty unclear that this trade war is a net win for the economy at this point".

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