Rising oil imports bump up US trade deficit to near five-year high

US trade deficit

In January, increased oil prices and imports bumped up the US trade deficit by 9.6 per cent. Statoil photo.

US trade deficit up by 9.6 per cent

On Tuesday, the Commerce Department reported the US trade deficit grew 9.6 per cent to $48.5 billion.  Rising oil prices and increased oil imports helped push the trade deficit to the nearly five-year high and points to slower growth in the first quarter of 2017.

The Commerce Department reported in January, imports of goods and services increased 2.3 per cent to $240.6 billion, the highest since December, 2014.  The US also imported 259 million barrels of crude oil, the largest amount since July, 2013.

Inflation-adjusted imports and exports were the highest on record in January, suggesting an improving domestic demand and strong economic growth among US trading partners.

However, the growing trade gap is a challenge for the Trump administration as it could weigh on economic growth in the first quarter of the Trump presidency and may intensify the debate on a cross-border tax.

“Team Trump really has their work cut out for them if they are going to stick with the campaign pledge to double growth,” Chris Rupkey, chief economist at MUFG in New York told Reuters. “If it is not made in America then we don’t want it is what the Trump administration is saying.”

So far, President Trump has pulled out of theTrans-Pacific Partnership trade pact and has said he wants to renegotiate NAFTA.

Economists are warning these America-first, or protectionist policies, are a threat to the economic health of the United States as other nations could retaliate.  Last week, reports suggested the Trump administration was preparing to ignore any rulings by the World Trade Organization it sees as an affront to US sovereignty.

In an interview with Reuters, Marc Chandler, global currency strategy head at Brown Brothers Harriman in New York said “If the U.S. carries through with its threats not to heed WTO rulings, it will encourage other countries to defect from the international free-trade regime and increase the risks of beggar-thy-neighbor policies.”

Despite these warnings, Commerce Secretary Wilbur Ross said “In the coming months we will renegotiate bad trade deals and bring renewed energy to trade enforcement in defense of all hard-working Americans,” Ross said.

 

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