The US goods trade deficit has surged to a record high in 2018 as strong domestic demand fuelled by lower taxes pulled in imports, despite the Trump administration’s America First policies.
President Donald Trump pledged on both the campaign trail and as president to reduce the deficit by shutting out more unfairly traded imports and renegotiating free trade agreements.
The US Commerce Department said a 12.4 per cent jump in the goods deficit in December had contributed to the record $US891.3 billion ($A1.257 trillion) goods trade shortfall last year.
The overall trade deficit surged 12.5 per cent to $US621.0 billion in 2018, the largest since 2008.
The White House has argued that reducing the trade deficit would boost annual economic growth to its goal of 3 per cent on a sustainable basis.
The government also sought to stimulate the economy with a $US1.5 trillion tax cut package, which jolted both consumer and business spending, helping to lift imported goods to a record $US2.6 trillion in 2018.
The United States last year imposed tariffs on $US250 billion worth of goods imported from China, with Beijing hitting back with duties on $US110 billion worth of American products.
Mr Trump has delayed tariffs on $US200 billion worth of Chinese imports as negotiations to resolve the eight-month trade war continue.
Businesses likely stocked up on imports in anticipation of further duties on Chinese goods, which ironically contributed to the deterioration in the trade deficit last year.
The goods trade deficit with China increased 11.6 per cent to an all-time high of $US419.2 billion in 2018. The US, which also slapped duties on imported steel, aluminium, solar panels and washing machines, had record imports from 60 countries in 2018, led by China, Mexico and Germany.
“Perhaps Donald Trump will now discover that tweets and bluster alone won’t dramatically shrink the trade deficit,” said Scott Paul, president of the Alliance for American Manufacturing in Washington.
“The administration’s fiscal policies have helped to boost the trade deficit.”
Economists expect exports to remain weak even if Washington and Beijing strike a trade deal.