US trade gap hits 10-year high as Trump's trade war backfires - as it happened

The US trade gap with China has hit a record level, in a blow to president Trump's America First policies

• Latest: US trade gap hits $621bn
• Trade gap with China at record, despite tariffs
• Expert: Protectionism isn't the answer

Earlier:

• OECD cuts global growth forecasts
• No-deal Brexit likely to cause recession
• Australia's economy only grew 0.2% in last quarter

9.19pm GMT

Finally, the US stick market has closed in the red.

The S&P 500 lost 0.6%, the Dow finished 0,5% lower and the Nasdaq shed almost 1%

6.32pm GMT

The trade figures haven't brought much cheer to Wall Street today, where the Dow is down 149 points or 0.6% at 25,656.

6.30pm GMT

Marketwatch's Paul Brandus agrees that Donald Trump has pushed up the US trade gap, by making the deficit larger.

He says Trump's tax cut forced the US to borrow more, with predictable (and indeed predicted) consequences...

"If foreigners buy more government bonds (which is how the Treasury borrows money), that causes an appreciation of the exchange rate," points out Sherman Robinson, a senior fellow at the Peterson Institute for International Economics in Washington. "This makes our exports more expensive abroad and imports cheaper to U.S. citizens."

Which means foreigners buy fewer of our exports and we buy more of their imports. It's that simple.

4.15pm GMT

A reminder of the key points in the US trade data:

Trade Wars? Where?:

US Trade Deficit soars in December. -$59.8 billion, highest since Oct 08 (Exports -1.9% / Imports +2.1)

Trade Deficit FY18 +12.5% $621 billion (Exports +6.3% / Imports +7.5%)

All-Time Trade Deficit with China $419 billion.

2.56pm GMT

Here's our news story on the US trade figures.

US trade deficit hits 10-year high as Trump trade wars backfire https://t.co/hgMwhSvTM9

2.56pm GMT

Economist Jeoff Hall points out that December's US-China trade gap was a record - and much, much wider than at the end of Barack Obama's presidency.

The U.S. trade deficit with China in December was $36.831 bn, lowest in six months, but $6.0 bn (19.5%) higher than in December 2017. It was the largest December deficit with China on record and $9 bn (32.9%) higher than the one President Trump inherited from December 2016. pic.twitter.com/JcPcGKXCQh

2.36pm GMT

More reaction to the US trade figures:

New: US trade deficit grew $69 billion in 2018, hitting a 10-year high. This despite President Trump's efforts to revive American manufacturing & reduce dependence on imported goods. Since Trump took office, deficit has grown by about $100 billion, Census Bureau reports.

Lots of eye-popping numbers in the U.S. 2018 trade data today: $621b goods+services gap, record $891b goods gap, and, drum roll... $1 trillion infl-adjusted goods gap.https://t.co/HvpqEd0Fpc

It's ironic that the U.S.'s trade deficit has widened and the dollar has strengthened amid all the heated trade rhetoric, the opposite of the stated goal. https://t.co/vl7Pg4YH6W

2.32pm GMT

America's widening trade gap is likely to drag economic growth down in 2019, predicts Andrew Hunter of Capital Economics.

He writes:

The widening in the trade deficit to a 10-year high of $59.8bn in December, from $50.3bn, confirms that net trade was a drag on GDP growth in fourth quarter, and we expect that drag to intensify in the first quarter....

Import growth is on course to pick up, but the decline in December will hold back real exports, particularly with global demand continuing to weaken. With real consumption growth also set to slow following weakness in December, the upshot is that GDP growth remains on course to slow to only around 1.5% annualised in the first quarter.

2.11pm GMT

Last year Donald Trump imposed tariffs on $250bn of Chinese imports in an attempt to close the US trade gap. He also brought in levies on steel and aluminium from around the world, plus tariffs on some goods from Europe.

So the $621bn question is... why did the trade deficit get bigger?!

US #trade deficit vis-a-vis #China rose 11% in 2018 breaching the $400bn mark.
Worth repeating, US trade deficit is result of fiscally-stimulated US outpacing RoW & stronger #dollar
Protectionism (#tariffs) is not the solution & Chinese promise to import more not realistic pic.twitter.com/IUFVwGNLIG

2.10pm GMT

Bloomberg's Shawn Donnan has points out that America's services surplus with the rest of the world grew last year (but not enough to keep up with the rising goods deficit).

For what it's worth the merchandise trade deficit - which a lot of people focus on - hit a record.

But that's an incomplete picture of US economy. The services surplus and its growth is important.

It hit $270bn in 2018 as US exported more than $800bn in services. pic.twitter.com/EqiXyDm7CD

1.55pm GMT

CNN's Christine Romans agrees the White House won't be happy with these trade stats:

Trump's entire trade policy is predicated on his belief that trade deficits represent failure. Just in: US trade deficit 2018 worst in a decade. Goods deficit a record. China deficit a record.

1.53pm GMT

President Trump may regret tweeting last year that "trade wars are good, and easy to win".

Trade wars are good and easy to win. pic.twitter.com/cbIeU3SfGO

1.50pm GMT

In December, the US trade deficit reached highest level since the financial crisis as exports declined again and imports increased. The 2018-deficit was the largest ever recorded despite tariffs and trade skirmishes #trade #macrobond pic.twitter.com/C0TmpLHqsp

1.47pm GMT

The Washington Post says today's US trade figures show that Donald Trump's trade policies aren't helping the US economy.

They also point out that the trade in goods deficit (ignoring services) has hit a record high.

US posted record-breaking $891.2 billion merchandise trade deficit in 2018, despite Trump's 'America First' policies

President Trump's tariffs and tough policies have failed to shrink a trade gap that he argues represents a massive transfer of wealth from Americans to foreigners. He begins his reelection drive with a core campaign promise unfulfilled - and with a recent flurry of economic research showing that his embrace of tariffs is damaging the U.S. economy.

Trump is obsessed with trade deficits, (incorrectly) believing them a measure of who's winning and who's losing. Well, by his own measure, we must be "losing" more: U.S. just posted its biggest merchandise trade deficit ever, $891.2 billion https://t.co/nCqvU5Mwcl

1.44pm GMT

Newsflash: the US trade deficit with the rest of the world has soared to its highest level since 2008, in a blow to Donald Trump's economic plans.

The gap between US imports and exports soared in 2018 to $621bn, up from $552.3bn in 2017.

BREAKING! US #trade #deficit grows to almost USD 60 billion in December. 2018 trade deficit USD 621 billion, highest since 2008! pic.twitter.com/V6GEf76r9S

WASHINGTON (AP) - The U.S. trade deficit in 2018 widened to decade-long high of $621 billion; China imbalance widened to record-large gap.

1.26pm GMT

Newsflash: US companies created 183,000 new jobs in February, according to the ADP monthly survey of private sector employment.

That's below the 190,000 which economists expected. It may mean that Friday's non-farm payroll (NFP, the broader measure of US employment) will be a bit weaker than expected.

The revision to January ADP employment makes it the best month since May 2015. pic.twitter.com/ogCsnJs8AZ

12.56pm GMT

Most of John Cunliffe's speech is devoted to the issue of what might cause the next financial crisis.

Debt contracts are essentially claims on the future and the future, when it arrives, does not always honour them.....

I expect the next 'crisis' to involve some form of over-valuation of assets, over-extension of credit and losses when this corrects.

The re-imposition of long forgotten constraints on the ownership of land seems to have triggered the great financial crisis of AD 33, leading to fire-sales and a crash in land values, default of leveraged landowners and a credit crunch throughout the Roman Empire.

The default by King Edward III of England on the massive amounts he had borrowed from the leading Florentine banking families contributed - along with a bank run by the Neapolitan nobility and the bankruptcy of the Florentine Commune - to the Florentine credit crunch of the 1340s. Edward borrowed to finance what became the Hundred Years War and defaulted when it became apparent that he could not win the war and capture the revenues he needed to repay the debt.

I might have talked today about the rapid and extensive evolution of market-based finance in recent years such that it now accounts for nearly half of the international financial system. It carries different and perhaps lesser risks than the banking system. But we know much less about how it might respond in stress and have fewer policy tools to address vulnerabilities. I might equally have talked about cyber risk or the impact of a credit correction in China. It is of course the job of policymakers like me to assess and address potential vulnerabilities like these, and we report on them regularly.

But to me the bigger point is that at some point, in some way a correction will be triggered when the future, for whatever reason, does not match up to expectations of those who have lent and borrowed and bought assets. Our fundamental task is to ensure that when that happens, the correction can be absorbed and does not lead to a 'great crisis', as it did 10 years ago, with all the social and economic loss that entails.

Jon Cunliffe speaks to students at @LSEnews about what central banks can do to monitor risks in the economy, build a resilient financial system and avoid a repeat of the 2008 economic crisis. https://t.co/nJIQdHQYlL pic.twitter.com/RtnsRCnqmy

12.30pm GMT

Sir Jon Cunliffe, Deputy Governor of the Bank of England, is giving a speech at the London School of Economics now.

The most prominent short-term risk facing the UK today of some financial sector correction is the possibility of an extremely disorderly Brexit.

Such an outcome may not be what we expect to happen or what is likely to happen but rather the worst possible case. The risk has not been generated by the financial sector. But, if it occurred, it would almost certainly lead to a correction in UK asset prices and losses for UK banks.

In short we have acted to make sure the system is resilient to a worst case major economic shock from Brexit. That does not mean losses would be avoided.

Or that it would be without volatility: financial stability does not mean market stability. But it does mean that the financial system would not contribute to and amplify the shock, and would be able to continue to provide critical economic services to the economy.

I think this was a pretty big deal yesterday. Carney downgrades Bank's cataclysmic Nov no deal warning significantly. Contingency plans by UK and EU have reduced the threat a lot. Still bad tho ... No-deal damage would be less than we feared, says Carneyhttps://t.co/Itb1XcknPd pic.twitter.com/8wpSDI82pJ

12.03pm GMT

It's been a fairly dull morning in the financial markets.

Australia's worryingly weak growth figures dampened the mood, and the OECD's downgrades added more gloom.

The OECD became the latest institution to ring the Brexit alarm bells. It stated that the UK economy is expected to grow 0.8% in 2019, just shy of half the already paltry 1.4% posted last year. And that's with a deal; without and the OECD warned the UK could plunge into a recession that would 'generate sizeable negative spillovers on growth in other countries'.

Britain wasn't the only nation dealt a worrying report card by the OECD. For 2019, China is now expected to see GDP of 6.2%, 0.1% lower than November's forecasts and a significant drop from 2018's 6.6%; the US is estimated at 2.6% against last year's 2.8%. As for the Eurozone as a whole, the region is forecast to grow by a measly 1%, mainly due to the faltering economies of Germany and Italy.

11.14am GMT

The OECD has a stark warning for the UK too -- growth in 2019 is likely to be the weakest since the financial crisis.

It now expects the UK will only grow by 0.8% this year, down from 1.4% in 2018. Today's report shows how growth has lagged behind other G7 members since the 2016 referendum, as companies have refused to invest.

"The costs would also be magnified if this also induced a further decline in business and financial market confidence and disruptions in financial markets.

In such a scenario, the likely near-term recession in the United Kingdom would generate sizeable negative spillovers on growth in other countries."

Related: No-deal Brexit would plunge UK economy into recession - OECD

11.10am GMT

There's no cheer for Italy or Turkey in today's report -- the OECD thinks their economies will shrink this year.

#oecd cuts Italy's GDP forecasts for 2019 to -0.2% from previous +0,9%, and to +0.5% from previous +0,9% for 2020. Another year of recession for Belpaese

10.53am GMT

Here's a full list of the OECD's new growth forecasts, and the downgrades compared with November's forecasts:

10.29am GMT

Here's the key messages from the OECD today (you can see its presentation here).

The OECD makes large cuts to euro area GDP forecasts while calling for the ECB to signal low rates for longer. Crucially, @LauBooneEco makes the case for a coordinated fiscal stimulus along with structural reforms. pic.twitter.com/ktjvt6vcLA

10.21am GMT

The OECD's top economist, Laurence Boone, has a sharp warning for policymakers - they needs to do more to prevent the slowdown turning into a downturn.

She says:

"The global economy is facing increasingly serious headwinds.

A sharper slowdown in any of the major regions could derail activity worldwide, especially if it spills over to financial markets. Governments should intensify multilateral dialogue to limit risks and coordinate policy actions to avoid a further downturn."

Since the #OECD last downgraded its forecasts in November, little has gone right for the world's richest economies: Weakness in the euro area and #China are proving more persistent, trade growth has slowed sharply and uncertainty over #Brexit has continued - Bloomberg pic.twitter.com/DLojVmMo0S

10.11am GMT

Ouch! The OECD has more than halved its forecast for Germany's growth in 2019, from 1.6% to just 0.7%.

That would be a real blow to Germany, which shrank slightly in the second half of 2018.

10.09am GMT

The OECD says it has slashed its growth forecasts due to the slowdown in Europe, and the risks from China.

It warns:

The global economy is slowing and major risks persist, with growth weakening much more than expected in Europe.

Economic prospects are now weaker in nearly all G20 countries than previously anticipated. Vulnerabilities stemming from China and the weakening European economy, combined with a slowdown in trade and global manufacturing, high policy uncertainty and risks in financial markets, could undermine strong and sustainable medium-term growth worldwide.

10.05am GMT

NEWSFLASH: The OECD thinktank has slashed its growth forecasts, warning that Brexit uncertainty and trade disputes are hurting the global economy.

The OECD now expects the world economy will expand by 3.3% in 2019, down from 3.5% previously. For 2020, it expects growth of 3.4%, down from 3.6% before.

9.59am GMT

In the financial markets, the pound is dipping as traders fret about Brexit.

The UK's efforts to win new concessions from Brussels over the Irish Backstop seem to be making little progress, despite deploying the Attorney General's vocal charms this week.

Brexit talks last night were said to be pretty rough. No meeting of minds. Appears that Geoffrey Cox unable to nudge things even to the point where he can rethink his legal advice..

9.36am GMT

Goldman Sachs employees will be chucking out their ties and high heels and ordering new t-shirts and trainers today, after the Wall Street bank tore up its dress code.

The firm is moving to a "flexible dress code", recognising the fact that workplaces everywhere are becoming more casual.

"Of course, casual dress is not appropriate every day and for every interaction and we trust you will consistently exercise good judgment in this regard.

"All of us know what is and is not appropriate for the workplace."

"we trust our employees will exercise consistently good judgement in their dress sense", an actual thing said by a banker https://t.co/kGUpICaUWV

Related: Goldman Sachs relaxes dress code for 'more casual environment'

8.51am GMT

After nearly four months of imprisonment, Carlos Ghosn has finally been released from Tokyo's detention centre.

Ghosn, whose prolonged custody has sparked international criticism of Japan's "hostage justice", was driven past hundreds of reporters, photographers and TV crews on Wednesday afternoon, a day after a court in Tokyo granted him bail.

Live TV footage showed Ghosn, dressed in a dark blue uniform, light blue baseball cap and surgical face mask, being escorted out of Tokyo detention centre by several officials and taken to a silver van. Reports said that a a car from the French embassy had arrived at the detention centre, as media helicopters swirled overhead.

8.40am GMT

Adam Cole of Royal Bank of Canada also believes Australia's central bank could be forced to cut interest rates soon:

He told clients:

Australia's Q4 GDP rose 0.2% q/q - below consensus (0.3%) and well below the RBA's expectation of around 0.6%.

The key domestic demand components were all weak and our economists suggest the door for rate cuts has opened further and the downside risks to their flat profile have increased.

8.33am GMT

Neil Wilson of Markets.com says Australia's slowdown is a worrying sign:

China's softness is a key factor and the weaker outlook for the world's second biggest economy is a long-term drag for Australia, never mind what happens on trade with the US.

If you look at the global economic outlook, the Aussie is a proxy for that bullish sentiment and the news and date are we seeing is not terribly rosy.

8.26am GMT

These growth figures are a body blow to Australia's centre-right government, explains my colleague Amy Remeikis:

Scott Morrison has increasingly staked the Coalition's election chances on the economy, warning repeatedly "the economy will be weaker under Labor". This week the prime minister again sounded the alarm that voters could see a return to 1991 recession conditions under a Shorten government.

Morrison honed his message in a speech to the Australian Financial Review Business Summit on Tuesday, shaping the election as a contest between "enterprise and envy".

Related: Election blow for Coalition as Australia falls into per-capita recession

8.19am GMT

The Australian dollar has fallen faster than England wickets on a bad day at the Gabba, hitting a four-month low.

With growth so weak in the last quarter, traders are calculating that Australia's central bank must be more cautious. It could even cut interest rates to help the economy.

The Aussie dollar dropped to a 4-month low of 0.7028. The Aussie dollar could see further downside.

Even though the Reserve Bank of Australia continue to put on a brave face, the economic backdrop remains uncertain and data is tilting to the weakside, boosting speculation of a rate cut from the central bank.

8.08am GMT

Australia's growth figures are even worse if you adjust for population changes.

On a per-capita basis, Australia's GDP has actually shrunk for the last six months, which puts the country into a 'per capita recession'.

Australia officially enters a "per capita" GDP recession, the first since 2006. We are clearly too reliant on population growth to support economic activity and both monetary and fiscal policy makers should be concerned #ausbiz #auspol pic.twitter.com/AmKIkEUxCS

Bad GDP numbers to end 2018 - Australia officially enters a per-capita recession after two negative quarters. The headline figures look OK because of Australia's high population growth - the living standards of existing residents are going backwards #ausbiz #auspol

8.00am GMT

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The global slowdown has claimed another victim. Australia - for so long one of the bright sparks in the world economy - has suffered a sharp slowdown.

Australia joins the slowing world economy as GDP growth falls to 0.2% in the final quarter of 2018 and to an annual rate of 2.3%

Looking into the Australia GDP data the growth such as it was is this "Government final consumption expenditure increased 1.8% during the quarter contributing 0.3 percentage points to GDP growth."

Australia: GDP Growth Rate year-on-year at 2.3% | March 6 2019 " via @tEconomics https://t.co/BoD7VEzpsk pic.twitter.com/8Ae0DOISVr

"Good news was hard to find in the latest assessment of the Australian economy.

"Households are holding up okay despite lacklustre wage growth, although the key question is how long can that persist?"