U.S. Trade Deficit Shrinks, but Not Because Factories Are Returning

Economists say the hefty tariffs Mr. Trump has placed on China have encouraged American consumers to purchase goods from other countries and have not led to an American manufacturing renaissance.

“Tariffs to date have clearly had a significant impact on imports from China,” said Brad Setser, a senior fellow at the Council on Foreign Relations. “They equally clearly have not led to a stronger U.S. manufacturing sector.”

Rather than bringing manufacturing back to the United States, the clash with China has caused American companies and consumers to shift purchases to other countries, like Mexico, Vietnam and South Korea, said Mary E. Lovely, a senior fellow at the Peterson Institute for International Economics.

Data released Wednesday morning showed the trade deficit in goods with Mexico increased $21.1 billion last year to a record $101.8 billion, as the United States brought in more goods from its southern neighbor. The trade deficit in goods with Canada grew by $8 billion, while the gap with Taiwan increased by $7.8 billion.

“You’re going to see this rearrangement of the deck chairs,” Ms. Lovely said.

The trade deficit in goods with the European Union also expanded to a record $177.9 billion in 2019, presaging Mr. Trump’s next conflict. In recent weeks, Mr. Trump has said that his attention was shifting to Europe now that he has signed trade deals with China, Japan, Canada and Mexico.

Mr. Trump has criticized Europe for selling more to the United States than it buys and has accused its central bank of pushing down the value of the euro to make it easier for European companies to compete against American rivals. His administration is already imposing tariffs on Europe over airplane subsidies, and is threatening further levies in response to its digital taxes and on its cars.

Many economists have predicted that Mr. Trump’s trade deal with China would give businesses more certainty about trading conditions and cause imports from China to rebound, at least in part, in the coming months.

Article source: https://www.nytimes.com/2020/02/05/business/economy/trump-trade.html?emc=rss&partner=rss