The U.S. Commerce Department reported this month that the trade deficit for 2018 reached a record $891.3 billion and grew by nearly 13 percent over 2017. As investors, what should we be taking away from this metric?
The first question might be: How did we get to this point? President Donald Trump assured us one year ago that raising tariffs on imports from other countries would force them to lower their import tariffs and correspondingly reduce the U.S. trade deficit. In fact, his announcement last year of the imposition of punitive tariffs had the opposite effect of stimulating U.S. businesses to import more before the costs went up, which exacerbated the imbalance.