2017 Trade Deficit Is Up Under President Trump, and That’s OK!

The U.S. Bureau of Economic Analysis (BEA) today announced that the U.S. trade deficit for 2017 was $566 billion. According to the BEA: “For 2017, the goods and services deficit increased $61.2 billion, or 12.1 percent, from 2016.”

According to Bryan Riley, Director of NTU’s Free Trade Initiative, “This shouldn’t surprise anyone. U.S. economic growth in 2017 was much higher than in 2016. A stronger economy means Americans can afford to spend more on both U.S.-made and imported goods and services, and as a result the trade deficit may increase. That’s just what we are seeing now.”

Historically, there is a strong correlation between U.S. greater economic growth and a larger trade deficit. On the other hand, the United States had a trade surplus throughout most of the Great Depression. More recently, from 2008 to 2009, the U.S. economy shrank, and the trade deficit declined by 45 percent. As the economy rebounded, the trade deficit increased.

Riley added, “The Trump Administration has successfully implemented pro-growth policies such as tax reform and deregulation. As the economy expands and creates jobs, the administration should not jeopardize these gains by getting sidetracked by a misguided focus on trade deficits.” He mentioned the threat of new taxes on imported steel and aluminum used by U.S. manufacturers and continued uncertainty over the North American Free Trade Agreement (NAFTA) as policies that could jeopardize continued economic growth.