US trade deficit widens in 2016

Imports and Exports | | MIC Customs Solutions |

The US trade deficit shrank in December 2016, though this was not enough to prevent the gap from widening for the year as a whole.

US government figures have shown that the country's trade deficit for 2016 widened by 0.4 per cent compared to the year before.

Data from the US Commerce Department shows that the trade gap for the year grew to $502.3 billion (€470.28 billion), including a wider annual gap with Mexico offsetting a narrowing of the country's deficit with China.

This overall increase came despite the trade gap for December 2016 closing by 3.2 per cent to $44.3 billion, ending two straight months of increases thanks to exports hitting their highest level for more than a year and a half.

John Ryding, chief economist at RDQ Economics in New York, said the widening of the deficit is a result of the country's economy being at full employment, meaning any acceleration in demand will be accompanied by import growth.

He said: "The US simply does not have enough spare labor and capacity at any exchange rate to close the deficit, which will likely widen in 2017 and 2018."

The trade outlook for the US in 2017 remains uncertain due to the protectionist instincts of new president Donald Trump, who recently pulled the country out of the Trans-Pacific Partnership free trade agreement.