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By Hugh Cameron
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The United States goods and trade balance went deeper into the red in December, providing the Trump administration with more leverage as it seeks to reshape America's approach to global commerce.
Surpassing consensus forecasts, the nation's trade balance—the difference in dollar amounts between exports and imports of goods and services—reached a deficit of $98.4 billion in December, its highest level since March 2022 and widened 25 percent from November's revised deficit of $78.9 billion.
On an annual basis, the deficit jumped to $918.4 billion from $784.9 billion in 2023, having previously fallen from $951.2 billion in 2022.
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Why It Matters
While deficits are not themselves measures of a nation's economic health—these often being the result of high foreign investment, economic growth or access to lower-cost imports—the widening gap between imports and exports will likely be jumped on by the Trump administration as evidence that America is being taken advantage of on the global stage, and used to support the president's pursuit of wide-scale trade reforms.
Trump has previously touted America's deficit alongside immigration and drug trafficking as the motivation for his tariffs on China, Canada and Mexico, the latter two of which have been paused thanks to last-minute agreements with the U.S.
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What To Know
According to Wednesday's announcement from the Bureau of Economic Analysis, December exports totaled $266.5 billion, down $7.1 billion from November, while imports increased $12.4 billion to an all-time high of $364.9 billion.
Annually, America's goods and services deficit rose by $133.5 billion, or 17 percent, from 2023. Exports totaled $3.19 trillion, an increase of $119.8 billion from 2023, while imports reached $4.11 trillion, up $253.3 billion from the previous year.
December's figures show surpluses with several countries, including the Netherlands ($5 billion), South and Central America ($3.5 billion) and the United Kingdom ($2.3 billion).
Significant deficits were recorded with China ($25.3 billion), the European Union ($20.4 billion), Mexico ($15.2 billion), Switzerland ($13 billion), Vietnam ($11.4 billion) and Canada ($7.9 billion).
What People Are Saying
Ernie Tedeschi, director of Economics at the Yale Budget Lab and former White House economic adviser, told NPR on Monday: "There seems to be this sense in the White House that trade surpluses are good and trade deficits are bad. There are cases where that may be the case. But look, we have a trade deficit because the United States is a rich country. And we are using our high income to buy goods and services from other countries."
"Germany produces trade surpluses from year to year, and Germany has seen economic stagnation," Tedeschi added.
Robert Z. Lawrence, professor of International Trade and Investment at Harvard Kennedy School, told Newsweek: "All a trade deficit tells us is what is the difference between what Americans are spending and what they are earning, i.e., how much they are borrowing from the rest of the world.
"If we are borrowing, it implies little about whether trade is fair or unfair or our tariffs are too high or low. As with all borrowing, the key question is, what are we doing with the money? If we are spending in a way that we will get richer and more able to repay, i.e., are investing more, it's a good thing."
"Higher imports could reflect stronger U.S. growth—a good thing," he added. "But if we are spending more than we tax and are running government deficits or using the borrowing to consume, we need to be more worried about how we can pay it back."
"Imposing tariffs without changing our spending patterns will have very little impact on the trade deficit, i.e., how much we borrow."
Economist Gary Hufbauer told Newsweek: "As long as the trade deficit is elevated and rising, Trump will cite the numbers as evidence of unfair foreign practices and the need for more tariffs."
"Contrary to Trump, the only ways to reduce the trade deficit are to slash the federal budget deficit, increase household savings, and raise retained business profits," Hufbauer said. He added that the president's tariffs "will not do the trick" and that these "will simply shift the trade deficit between foreign countries and between different sectors of the U.S. economy."
"Moreover, the current rise in the trade deficit simply reflects the fact that the U.S. economy is doing better than its trading partners," Hufbauer said. "Demand in the U.S. is stronger than demand elsewhere. As a matter of economic history, the U.S. trade deficit expands when the U.S. economy is strong; it contracts when the U.S. economy goes into recession."
What Happens Next
Trump's planned 25 percent tariffs on Mexico and Canada have been put on ice for a month after leaders of the two countries agreed to reinforce their border security efforts. Meanwhile, the additional 10 percent tariffs on Chinese goods have already taken effect.
The president has also recently floated imposing duties on the EU and U.K., telling reporters on Sunday that these could be implemented "pretty soon." Trump justified the move with reference to America's trade deficit, saying: "They take almost nothing, and we take everything from them."
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