News & Analysis

US–China Trade Gap at Record High

March 7, 2019

By Deepta Bolaky
 @DeeptaGOMarkets

US-China Trade Gap at Record High

Trade Deficit a Decade High- Was a Trade War Worth it?

The Trade Deficit reported mid-week surprised the markets as it climbed to a decade-high. We also note that the US-China trade gap has reached a record high. It is worth thinking whether President Trump did the right thing in engaging in a trade war with its peers. From the fresh figures received this week, investors are thinking the same:

Was all the trade tensions that had taken the financial markets on a volatile ride worth it?

After two months of rally, investors were waiting for more concrete details on the trade negotiations. Lack of developments has been oscillating risk sentiment in the equity markets this week as they are reluctant to push the rally further. The trade deficit is a blow for President Trump because the tariffs widened the deficit instead of narrowing it.

Trade is one of the President’s main campaign promises and investors struggling to find a firm direction amid lack of clarity on the trade front, slowing global growth and the widened trade deficit. The trade data has overshadowed the news that both nations are in discussions and that an agreement can be reached by the end of the month.

Are President Trump’s own policies are making it hard for him to realise his campaign promises?

  • Imports rose to $264.9bn, a rise of 2.1%. Tax cuts are boosting consumption and demand for imported goods has increased.
  • Exports dropped to $205.1bn which is a fall of 1.9%. A rising dollar is making the US less competitive and its exports more expensive.

At this stage, both countries are eager to strike a deal as trade tariffs are putting pressure on their respective economy.

Even if a deal is into place, will a reduced deficit with China be enough to reduce the US trade deficit?

This article is written by a GO Markets Analyst and is based on their independent analysis. They remain fully responsible for the views expressed as well as any remaining error or omissions. Trading Forex and Derivatives carries a high level of risk .