The U.S. goods and services trade deficit reached a nine-year high in 2017 at a time when President Donald Trump is renegotiating two trade deals in an effort to eliminate deficits with certain countries.
The goods and services trade deficit hit $566.0 billion in 2017, an increase of 12.1%, or $61.2 billion, over 2016, according to a monthly joint report released by the U.S. Census Bureau and the U.S. Bureau of Economic Analysis on Feb. 6.
The last time the U.S. trade deficit topped the 2017 figure was 2008, when it reached $708.7 billion.
Total exports were $2.33 trillion in 2017, a rise of $121.2 billion from 2016. Imports were $2.90 trillion, a $182.5 billion increase from the prior year.
Imports of consumer goods alone increased by $18.6 billion in 2017, according to the report. Within the consumer goods category, cell phones and other household goods rose by $9.5 billion during that period.
Phillip Swagel, an economics professor at the University of Maryland, told S&P Global Market Intelligence that although a weaker dollar over the past year might have been expected to boost exports and reduce imports, stronger growth in the U.S. than in areas including Europe and Japan actually means a wider trade deficit.
"The lower saving rate in the U.S. further means more imports for a given GDP growth rate," Swagel said. "Americans are spending instead of saving, and they buy imported items as part of that."
The widening trade deficit comes as Trump seeks to reduce deficits with global trading partners. The Trump administration is in talks to rework several free trade agreements, including the North American Free Trade Agreement with Canada and Mexico as well as the United States-Korea Free Trade Agreement with South Korea.
The U.S. saw a $2.1 billion increase in the deficit with South Korea in December 2017 compared to November, according to the report. On a yearly basis, the U.S. ran a $22.9 billion deficit with the Asian nation.
The U.S. ran a $27.6 billion deficit with South Korea in 2016, according to the Office of the U.S. Trade Representative, which said the deficit has grown over the past half-decade because of blocked market access for American exports. To make the domestic industry more competitive, Trump recently approved recommended tariffs of up to 50% on imports of large residential washing machines built by South Korean companies LG Electronics Inc. and Samsung Electronics Co. Ltd.
The U.S. ran trade deficits with Mexico and Canada, its trading partners under NAFTA, of $71.1 billion and $17.6 billion, respectively, in 2017, according to the Feb. 6 report. The largest U.S. trade deficit for the U.S. by country was with China, which totaled $375.2 billion in 2017.
On a monthly basis, the goods and services trade deficit in December 2017 was $53.1 billion, a $2.7 billion increase from the $50.4 billion deficit in November, the report noted.
The overall 2017 goods and services balance also marks the fourth straight year of an increased deficit dating back to 2013.
Swagel said he only expects the trade deficit to widen further from the Republican tax overhaul as well as from the federal budget package being negotiated in Congress. Still, he said that is not necessarily a bad thing.
"The tax cut will improve our growth plan and that's the important outcome," Swagel said. "If the trade deficit widens as a result, I think that's OK as long as the economy remains strong."
