Trump Is Actually Making the Trade Deficit Bigger
If you don’t understand what causes the trade deficit, you can’t fix it.
Not the whole picture, not by a long shot.
Photographer: Mandel Ngan/AFP/Getty Images
There were a few headlines last week to the effect that the 2018 U.S. trade deficit was an all-time record. That’s a dubious assertion. Yes, the reported $891 billion trade deficit in goods did top 2006’s $837 billion, but when making historical comparisons, it’s more informative to express these things as a percentage of gross domestic product, and 2018’s deficit of 4.3 percent of GDP was well short of 2006’s 6.1 percent:1
What’s more, the overall 2018 trade deficit (that is, including services as well as goods) was, at $621 billion, smaller even in unadjusted dollar terms than the deficits of 2005 to 2008. As a percentage of GDP, it’s not much more than half the size of the 2005 and 2006 deficits: