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The US trade deficit in December rose from the prior month to $59.8 billion seeing the gap widen in 2018 to a 10-year high of $621 billion as goods deficits with China, Mexico, EU widened to records. Tax cuts boosted domestic demand for imports as the strong dollar and retaliatory tariffs hurt exports.

 US Trade Dec 2018

Largest U.S. deficit since October of 2008 as exports declined for the third month and imports recovered.

The December gap was also a 10-year high and wider than the median estimate of economists. The merchandise-trade deficit with China, which has been the focus of President Trump’s trade war hit a record $419.2 billion in 2018. 

The trade gap widened to 3 percent of GDP from 2.8 percent in 2017. However it’s still significantly smaller than in the decade before the Great Recession, when it almost hit 6 percent. It isn't as simple as trade deals and tariffs the cooling global growth is weighing on exports. At the same time domestic demand keeps driving shipments from abroad, they are cheap, even with tariffs and secondly there may not be an alternative for a American made product.

The Goods only U.S. deficit with the world surged to a record $891.3 billion in 2018 from $807.5 billion the prior year. The merchandise deficits with Mexico and the European Union also hit records. On the flip side the surplus in services kept rising, hitting a record $270.2 billion last year. Clearly still not making up the goods gap.

For the full year, exports rose 6.3 percent to $2.5 trillion as shipments of goods including crude oil, petroleum products and aircraft engines increased. Imports soared 7.5 percent to $3.12 trillion on purchases of items from pharmaceuticals to computers, along with services such as travel. For December, exports fell 1.9 percent from the prior month, the biggest decline since early 2016, to $205.1 billion, on lower shipments of civilian aircraft, petroleum products and corn. Imports rose 2.1 percent to $264.9 billion, boosted by foods, consumer goods, computers and aircraft. The goods deficit was a record.

There is no way from hiding from the cost of the trade war. The imbalance highlighted in December alone shows how it has boosted the trade deficit with China. Merchandise exports to China fell $9.6 billion last year, while imports rose $34 billion.

Looking at the EU foe comparison, exports and imports both surged, though imports did post a larger gain.

Trade Report Breakdown 

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $59.8 billion in December, up $9.5 billion from $50.3 billion in November, revised.

US Trade Dec 2018 Breakdown

Exports

Exports of goods decreased $3.9 billion to $135.6 billion in December. Exports of goods on a Census basis decreased $3.7 billion.

  • Industrial supplies and materials decreased $2.1 billion.
  • Other petroleum products decreased $0.9 billion.
  • Crude oil decreased $0.5 billion.
  • Fuel oil decreased $0.4 billion.
  • Capital goods decreased $1.7 billion.
  • Civilian aircraft decreased $1.0 billion.
  • Net balance of payments adjustments decreased $0.2 billion.
  • Exports of services decreased less than $0.1 billion to $69.5 billion in December.
  • Transport decreased $0.2 billion. Financial services increased $0.1 billion.

Imports

Imports of goods increased $5.1 billion to $217.2 billion in December. Imports of goods on a Census basis increased $5.2 billion.

  • Capital goods increased $2.7 billion.
  • Computer accessories increased $0.7 billion.
  • Computers increased $0.7 billion.
  • Consumer goods increased $2.4 billion.
  • Household and kitchen appliances increased $0.7 billion.
  • Cell phones and other household goods increased $0.6 billion.
  • Net balance of payments adjustments decreased $0.2 billion.
  • Imports of services increased $0.5 billion to $47.7 billion in December.
  • Transport increased $0.4 billion.

Goods by Selected Countries and Areas:

Monthly – Census Basis for the December figures show:

Surpluses, in billions of dollars, with South and Central America ($3.5), Hong Kong ($2.2), Brazil ($0.8), United Kingdom ($0.6), and Singapore ($0.4).

Deficits were recorded, in billions of dollars, with China ($38.7), European Union ($15.8), Mexico ($8.8), Germany ($5.7), Japan ($5.5), Italy ($3.0), South Korea ($1.7), Taiwan ($1.6), France ($1.5), India ($1.4), OPEC ($1.3), Saudi Arabia ($1.2), and Canada ($0.7).

The deficit with China increased $3.2 billion to $38.7 billion in December. Exports increased $0.4 billion to $7.7 billion and imports increased $3.6 billion to $46.4 billion.

The deficit with Mexico increased $2.1 billion to $8.8 billion in December. Exports decreased $1.3 billion to $21.1 billion and imports increased $0.8 billion to $29.9 billion.

The deficit with India decreased $0.4 billion to $1.4 billion in December. Exports increased $0.6 billion to $3.3 billion and imports increased $0.3 billion to $4.7 billion.

Annual Summary for 2018 Exports, Imports, and Balance

For 2018, the goods and services deficit was $621.0 billion, up $68.8 billion from $552.3 billion in 2017. Exports were $2,500.0 billion in 2018, up $148.9 billion from 2017. Imports were $3,121.0 billion, up $217.7 billion from 2017.

The 2018 increase in the goods and services deficit reflected an increase in the goods deficit of $83.8 billion, or 10.4 percent, to $891.3 billion and an increase in the services surplus of $15.0 billion, or 5.9 percent, to $270.2 billion. As a percentage of U.S. gross domestic product, the goods and services deficit was 3.0 percent in 2018, up from 2.8 percent in 2017.

Exports 

Exports of goods increased $118.5 billion to $1,671.8 billion in 2018. Exports of goods on a Census basis increased $117.8 billion.

  • Industrial supplies and materials increased $74.2 billion. Crude oil increased $24.6 billion. Other petroleum products increased $14.4 billion. Capital goods increased $28.7 billion. Civilian aircraft engines increased $7.9 billion. Other industrial machines increased $2.9 billion. Computer accessories increased $2.5 billion.

Net balance of payments adjustments increased $0.6 billion.

Exports of services increased $30.4 billion to $828.1 billion in 2018.

  • Other business services, which includes research and development services; professional and management services; and technical, trade-related, and other services, increased $8.5 billion. Financial services increased $4.6 billion. Travel (for all purposes including education) increased $4.3 billion.

Imports

Imports of goods increased $202.2 billion to $2,563.1 billion in 2018. Imports of goods on a Census basis increased $200.8 billion.

  • Industrial supplies and materials increased $68.4 billion. Crude oil increased $24.6 billion. Capital goods increased $52.7 billion. Computers increased $8.7 billion. Electric apparatus increased $5.4 billion. Computer accessories increased $5.4 billion. Other industrial machines increased $5.1 billion. Consumer goods increased $46.1 billion. Pharmaceutical preparations increased $23.7 billion. Net balance of payments adjustments increased $1.4 billion. Imports of services increased $15.4 billion to $557.9 billion in 2018. Travel (for all purposes including education) increased $10.1 billion. Other business services increased $7.0 billion. Transport increased $6.5 billion. Insurance services decreased $13.0 billion.

Goods by Selected Countries and Areas – Census Basis

The 2018 figures show surpluses, in billions of dollars, with South and Central America ($41.5), Hong Kong ($31.1), Netherlands ($24.8), Australia ($15.2), and Belgium ($14.2).

Deficits were recorded, in billions of dollars, with China ($419.2), European Union ($169.3), Mexico ($81.5), Germany ($68.3), Japan ($67.6), Ireland ($46.8), Italy ($31.6), Malaysia ($26.5), India ($21.3), OPEC ($21.2), Canada ($19.8), Thailand ($19.3), Switzerland ($18.9), South Korea ($17.9), France ($16.2), Taiwan ($15.5), Russia ($14.1), Indonesia ($12.6), and Saudi Arabia ($10.5).

The deficit with China increased $43.6 billion to $419.2 billion in 2018. Exports decreased $9.6 billion to $120.3 billion and imports increased $34.0 billion to $539.5 billion.

The deficit with the European Union increased $17.9 billion to $169.3 billion in 2018. Exports increased $35.4 billion to $318.6 billion and imports increased $53.3 billion to $487.9 billion.

The surplus with South and Central America increased $7.3 billion to $41.5 billion in 2018. Exports increased $13.6 billion to $163.8 billion and imports increased $6.3 billion to $122.3 billion.

* * * All statistics referenced are seasonally adjusted; statistics are on a balance of payments basis unless otherwise specified. Additional statistics, including not seasonally adjusted statistics and details for goods on a Census basis, are available in exhibits 1-20b of this release. For information on data sources, definitions, and revision procedures, see the explanatory notes in this release.

Source: bea

From The Traders Community News Desk

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