One of the reasons former President Donald Trump started a trade war with China was to reduce the U.S. trade deficit with the world. The deficit with China at the time was more than seven times greater than that with any other country.
President Biden has largely kept those tariffs in place.
The U.S. trade deficit with the world in 2017, one year before the trade war went into effect: $1.06 trillion.
The trade deficit in 2023, the latest year for annual figures: $1.06 trillion.
The 2024 trade deficit is likely to be slightly higher, probably around $1.13 trillion. That would eclipse the 2018 record of $1.11 trillion. Annual U.S. Census Bureau figures are released in early February.
In fact, the U.S. trade deficit with the world has topped $1 trillion five of the last seven years, including the last three. It will soon be four in a row and six of the last eight. In other words, six of the eight largest deficits in U.S. history have occurred during the very years tariffs were supposed to reduce the deficit.
One overly simplistic explanation?
The issue is not who is selling but who is buying. Americans are buying. This year alone -- through August, the most recent data available -- U.S. imports from the world have increased $606.64 billion when compared to the same seven months of 2017.
That's $27.31 billion more in passenger vehicles, the leading U.S. import by value.
That's $25.25 billion more in more oil, the No. 2-ranked import by value.
That's $34.63 billion more in computers, which ranks third.
That's a whopping $55.61 billion more in the category that includes vaccines, plasma and other blood fractions, such as white blood cells.
That's $18.95 billion more in medicine in single-dose form, largely pills.
More, more, more. That's $16.32 billion more in motor vehicle parts, $19.51 billion more in computer parts, $14.70 billion more in electric-storage batteries, $13.90 billion more in commercial vehicles, and $11.90 billion more in solar panels.
A slightly more sophisticated response to why the deficit remains virtually unchanged: It's a sign of a pretty healthy U.S. economy or one pretending to be by loading up on debt -- or, as is probably the case, a little bit of both. When businesses and consumers are buying, they either have cash or confidence and often both.
While the U.S. trade deficit has changed not at all, essentially, the ratio between exports and imports hasn't changed much either. Through the first eight months of 2017, for every dollar of U.S. trade, 40 cents was an export. Today, that percentage has dipped a penny to 39 cents.
That's because while exports have not grown as much as imports -- $367.05 billion for exports, compared to the $606.64 billion total for imports since 2017 -- they have grown almost as rapidly, 36.39% for exports to 39.74% for imports.
But one thing has changed quite a bit, allowing Trump and Biden can claim at least a partial victory.
In 2017, the U.S deficit with China was $551.37 billion, more than seven times the size of the deficit with Japan, which then had the second-largest deficit at $78.56 billion.
Fast forward to 2023 and the U.S. deficit with China has shrunk to $279.42 billion while the U.S. deficit with Mexico has swelled to $152.38 billion, more than half as large as China's.
The U.S. deficit with Mexico, now the No. 1 U.S. trade partner, is not the only one to double in six years. The U.S. deficit with Vietnam has also doubled.
Supply chains, which proved to be fairly supple during the Covid-19 pandemic that began in 2020, have proven to be equally capable of handling targeted tariffs. I wrote previously about the declines in some U.S. imports from China and where the U.S. was now sourcing those imports -- largely Asian countries like Vietnam, Taiwan, Japan and Cambodia.