ifo Institute Expects US Current Account Deficit to Increase Slightly in 2018

The ifo Institute expects a further increase in the US current account deficit, despite the introduction of tariffs by US President Donald Trump. The US current account deficit is expected to total 464 billion US dollars in 2018, or 2.5 percent of annual economic output, according to projections calculated by the ifo Institute based on mid-year figures on the occasion of the annual conference of the EconPol research network. Last year the US current account deficit amounted to 449 billion US dollars, or a 2.3 percent deficit. The US current account balance with the EU for the first half of 2018, by contrast, reveals a small surplus of 7 billion US dollars as in previous years. It is striking that the USA generates high profits from investments in the EU, especially in the Netherlands and Ireland.

The USA is running a particularly high current account deficit with China, which amounted to 176 billion US dollars in the first half of 2018 alone. The US deficit with Mexico (45 billion US dollars) and Japan (40 billion US dollars) was also far higher than its deficit with the euro area in the first half of 2018.

The US deficit is primarily due to trade in goods. The value of US imports in 2018 will exceed that of its exports by 857 billion US dollars in 2018. Surpluses of 259 billion US dollars from services and over 252 billion US dollars from foreign assets can be offset against this figure. Transfer payments abroad for international cooperation, for example, increased the deficit by 119 billion US dollars.

At the other end of the scale, the USA ran current account surpluses with Britain (32 billion US dollars), Hong Kong (20 billion US dollars), Brazil (17 billion US dollars) and Canada (11 billion US dollars) in the first half of 2018.

Enquiries: Christian Grimme, +49(0)89/9224-1285; Grimme@ifo.de