FACT CHECK: How Large Is The US Trade Deficit?

David Sivak | Fact Check Editor

President Donald Trump claimed Saturday that the U.S. runs an $800 billion trade deficit.

“The United States has an $800 Billion Dollar Yearly Trade Deficit because of our ‘very stupid’ trade deals and policies,” he tweeted.

Verdict: False

The U.S. trade deficit, which is the result of the U.S. importing more goods and services than it exports, stood at $566 billion in 2017.

Fact Check:

Trump announced plans for new tariffs on steel and aluminum Thursday, with his administration arguing that such moves are necessary to protect the American economy. “Countries that refuse to give us reciprocal treatment or who engage in other unfair trading practices will find that we know how to defend our interests,” reads a report on the president’s 2018 trade agenda.

Although the U.S. imports a sizable share of its steel from allies like Canada, South Korea and the European Union, trading partners like China have been accused of dumping steel – that is, selling their product at a loss so that other countries cannot compete. The U.S has accused China of similar violations for aluminum.

China has previously warned that it may retaliate if the White House imposes tariffs, and the European Union has already threatened to levy tariffs on Harley-Davidson motorcycles, denim and, yes, Kentucky bourbon in response.

Trump sent out a string of tweets over the weekend, defending his decision.

“If the E.U. wants to further increase their already massive tariffs and barriers on U.S. companies doing business there, we will simply apply a Tax on their Cars which freely pour into the U.S.,” he tweeted.

In light of his announcement, Trump has taken to repeating a statistic he used extensively on the campaign trail to argue for more protectionist trade policies.

“We will soon be starting RECIPROCAL TAXES so that we will charge the same thing as they charge us. $800 Billion Trade Deficit-have no choice!” he tweeted Friday.

The U.S. does have a large and widening trade deficit, one that grew for the ninth year in a row as the economy continues to improve, consumers demand more foreign goods and investors seek opportunities in the U.S.

But the Census Bureau reported that the deficit stood at $566 billion, not $800 billion, in 2017. So what figure does Trump keep citing?

A White House official confirmed that the President was referring to one part of the overall trade deficit: the $810 billion goods deficit.

When people think of global trade, there’s a fair chance they’re thinking of cars, electronics, pharmaceuticals – the kind of manufactured goods that fall under that $810 billion deficit.

But there’s another piece of the trade equation that offsets the goods deficit: a $244 billion surplus for the trade of services. A third of all U.S. exports falls under the umbrella of services, including travel, banking and intellectual property (like the licensing of American movies and music).

Blanket statements by Trump that the U.S. “has an $800 Billion Dollar Yearly Trade Deficit” ignores the surplus for services and could easily give a layperson the false impression that traded goods account for the entire deficit.

The White House official defended Trump’s use of the $800 billion figure, saying that even if Trump did not specify that the figure only applies to traded goods, his tweets were made in the context of manufactured goods like steel and aluminum.

But Trump has also been imprecise with his language in the past, frequently making the very same claim without that added context.

“I’m only saying this. We’re spending money, and if you’re talking about trade, we’re losing a tremendous amount of money, according to many stats, $800 billion a year on trade,” Trump said in an interview with The New York Times during the 2016 campaign.

Out of context, the average person has no reason to believe that Trump is referring to anything other than the overall trade deficit.

Trump does word the claim more carefully in scripted remarks. During his inaugural address to Congress in 2017, he accurately referred to an $800 billion “trade deficit in goods.” He used the same terminology in his acceptance speech at the Republican National Convention in 2016.

The White House is expected to finalize the steel and aluminum tariffs sometime this week, and Trump has signaled that they may be used as a bargaining chip to renegotiate trade deals like NAFTA.

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David Sivak

Fact Check Editor

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