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The U.S. trade deficit widened in 2018 to a 10-year high of $621 billion, bucking President Donald Trump’s pledges to reduce it, as tax cuts boosted domestic demand for imports while the strong dollar and retaliatory tariffs weighed on exports.
The annual deficit in goods and services increased by $68.8 billion, or 12.5 percent, Commerce Department data showed Wednesday. The December gap jumped from the prior month to $59.8 billion, also a 10-year high and wider than the median estimate of economists. The merchandise-trade deficit with China -- the principal target of Trump’s trade war -- hit a record $419.2 billion in 2018.
As a share of the economy, the gap widened to 3 percent of GDP from 2.8 percent in 2017. It’s still significantly smaller than in the decade before the Great Recession, when it approached 6 percent.
While Trump frequently cites the deficit as evidence of the failure of his predecessors’ trade policies -- even though most economists don’t dwell on the indicator -- the gap has increased by $119 billion during his two years as president. Even if he completes an accord to end the tariff war with China, substantially shrinking the deficit may prove tough as cooling global growth weighs on exports while domestic demand keeps driving shipments from abroad.