Skip to main content

Economy U.S. trade deficit last year hit highest level since 2012

An U.S. flag flies as cranes for unloading shipping containers stand at the Port of Los Angeles in San Pedro, Calif., in this file photo.

Patrick T. Fallon/Bloomberg

The U.S. trade deficit narrowed slightly in December, but the improvement wasn't enough to keep the deficit for the entire year from rising to the highest level since 2012. That should provide fuel for President Donald Trump's contention that America needs a tougher approach to trade.

The deficit in December fell 3.2 per cent to $44.2-billion, the Commerce Department reported Tuesday. A gain in exports of commercial aircraft, heavy machinery and autos offset a rise in imports. For the whole year, the deficit rose 0.4 per cent to $502.3-billion, the highest annual imbalance since 2012.

Trump has pledged to impose penalty tariffs on countries such as China and Mexico to force them to drop what he contends are unfair trade practices that have cost millions of American jobs.

Story continues below advertisement

Since taking office on Jan. 20, Trump has pulled the country out of a 12-nation Pacific trade deal negotiated by former President Barack Obama. He has given notice that he also wants to renegotiate a two-decade-old free trade agreement with Mexico and Canada. Trump has also gotten into a dispute with the president of Mexico over who will pay for a border wall between the two countries. The Trump administration has suggested it might use a 20 per cent border tax on goods from Mexico to pay for the wall.

Trump made America's large trade deficits, lost factory jobs and stagnant wages for the middle class a central part of his campaign.

For 2016, America's deficit with China actually declined slightly, dropping 5.5 per cent to $347-billion after hitting an all-time high of $367.2-billion in 2015. Even with the improvement last year, the deficit with China is the largest with any country.

The deficit with Mexico rose 4.2 per cent in $63.2-billion in 2016, the largest imbalance with that country since 2011.

Trump has contended that both China and Mexico are using unfair trade practices such as currency manipulation to boost their sales to the United States. Private economists contend that broader factors, such as lower wages in both China and Mexico, play a bigger role in determining the trade deficits.

U.S. exporters have struggled for the past two years with a rising value of the dollar, which has made U.S. goods less competitive in global markets while making foreign goods cheaper for U.S. consumers. American manufacturers have also struggled with economic weakness in many key overseas markets.

The $502.3-billion deficit last year was up from a 2015 trade gap of $500.4-billion. For 2016, exports fell by 2.2 per cent after a decline of 4.8 per cent in 2015 as. Imports were down 1.8 per cent last year, reflecting in part the drop in global oil prices.

Story continues below advertisement

For 2016, the widening trade deficit shaved 0.1 percentage point from overall growth, down from a bigger 0.6 percentage point reduction in growth in 2015. The economy slowed to growth of just 1.6 per cent last year.

Analysts are hoping that growth will rebound to around 2.5 per cent in 2017 and even more in 2018, fueled by Trump's stimulus program of tax cuts, deregulation and increased spending on infrastructure. Trump pledged in the campaign to boost economic growth to 4 per cent or better.

Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

Cannabis pro newsletter