By Li Xuanmin, Global Times
US President Donald Trump’s trade policy has backfired, as the country’s trade deficit in goods with China in August jumped to a all-time high amid tumbling soybean exports and a halt in crude oil shipments to China.
Experts warned that if the US doesn’t scale back the escalating trade war with China, the Trump administration would have more to lose, as US exports continue to dwindle due to retaliatory tariffs while the country’s consumption-driven economy further expands imports, eventually taking a toll on the US economic outlook.
The US Commerce Department said on Friday the US trade deficit increased 6.4 percent to $53.2 billion, widening for a third straight month and reaching a record high since February despite Trump’s aim of narrowing the trade gap with China and other countries.
Against Trump’s expectations, China’s merchandise trade surplus with the US also grew in August to a record of $38.6 billion, up from $36.8 billion in July, according to the data.
Commenting on the data, Wu Xinbo, director of Fudan University’s Center for American Studies, told the Global Times on Sunday that “the US is now suffering from its own trade actions, and the country should reflect on its tariffs measure.”
Wu pointed out that the widened trade deficit was due to falling US exports, particularly soybeans and other industrial products as well as crude oil. In August, US soybean exports dropped $1 billion and shipments of crude oil fell $900 million, data from the US Commerce Department showed.
China used to be the US’ largest soybean buyer, but the country has slapped tariffs on US crops and actively sought alternative import sources amid escalating trade tensions.
Meanwhile, firms in China – the second-largest buyer of US crude oil – retaliated by suspending crude oil imports from the US, Reuters reported, citing data from Refinitiv Eikon, which showed a halt of US oil shipments to China in September.
“The widening trade deficit shows that imposing tariffs could not cut US imports due to the irreplaceable, cost-effective ‘Made in China’ products and the waning US manufacturing industry. So the move will only transfer the tariff burden to American importers and consumers and send them reeling,” Wu explained.
Bai Ming, deputy director of the Ministry of Commerce‘s International Market Research Institute, also noted US consumers’ preference to spend instead of save, which will push Americans to buy more foreign products and boost US imports.
As countermeasures from major US trading partners including China stay in place, with more expected to come in the near future, Wu predicted that US exports will slide further and lead to a wider trade deficit.
The widening trade deficit will drag down the US economy, experts said.
In the second quarter of 2018, the US economy expanded 4.2 percent year-on-year and net exports provided a 1.22 percentage-point boost, Bloomberg News reported.
“Running a current-account deficit means that the US needs to borrow dollars from other countries through issuing debts, and the debt build-up could be a potential threat to the sustainability of its economy as well as the credibility of the dollar,” Wu explained.
Bai also told the Global Times on Sunday that the uncertainty would deter foreign investors, leading to a decline in US foreign investment.
Trump’s new wave of tariffs on $200 billion worth of Chinese goods took effect on September 24, and the rate is expected to climb to 25 percent in January from the current level of 10 percent. China retaliated by instituting new tariffs on $60 billion worth of US goods the same day.