When evaluating President Donald Trump's economic policies, it's important to give credit for the successes.
Since Trump took office in early 2017, his strategy of cutting taxes and reducing regulations have helped to prolong a U.S. economic expansion that is now 10 years old, tied for the longest in U.S. history. The president also has already fulfilled his promise to create "millions and millions of jobs," a turn of phrase that technically means at least 4 million; and indeed, the number of employed people in the U.S. has increased by 4.5 million during his tenure, according to the Labor Department.
But Trump has thus far failed at one of his signature goals: reducing the U.S. international trade deficit, or the amount by which American imports exceed exports. The current account deficit - a broad measure of the trade balance that also encompasses some investment flows - has averaged $48.9 billion a month so far in 2019, roughly 17% higher than in 2016, the last full year before Trump took office.
"It's going in the wrong direction," Joseph Gagnon, a former top Federal Reserve economist who's now a senior fellow at the Peterson Institute for International Economics, said in a phone interview.
The swelling trade deficit comes as Trump has waged battles with China, Mexico, Canada and Europe over allegedly unfair duties, subsidies and other practices by foreign countries that he says put American households and businesses at a disadvantage.
Those efforts have yet to yield visible gains, and in the meantime some trade experts say the president's strategies seem to belie established economic theory and may actually undermine his goals.
One key factor in the swelling trade deficit is the economy's strength since Trump took office. His $1.5 trillion of tax cuts in late 2017, for example, came just in time to stimulate a renewed spurt of economic growth, which has energized financial markets and pushed the S&P 500 to new record highs as recently as this week.
As the economy accelerated, U.S. businesses went on a hiring spree, pushing the U.S. unemployment rate down to 3.6%, the lowest in a half century. That left more consumers and businesses feeling optimistic about their finances, and they did what they often do under such circumstances: buy things.
Since so many products consumed in the U.S. are sourced from overseas or assembled from imported parts or raw materials, the surge in spending simply drove up the trade deficit further, said Laura Baughman, president of the research firm Trade Partnership Worldwide. Her firm has conducted studies on the negative economic consequences of tariffs at the behest of a consortium of farmers and industry groups representing big U.S. importers like Walmart (WMT) - Get Report and Macy's (M) - Get Report .
"When the economy is booming, people want to buy stuff," Baughman said in a phone interview. "We don't make enough stuff in the U.S., so we import what we need, so imports grow."
As is typical for central banks when an economy is expanding, the Federal Reserve has pushed up interest rates in recent years to discourage households and businesses from excessive borrowing. The goal is to keep inflation from spiraling out of control while minimizing the severity of an eventual downturn.
Yet higher interest rates in the U.S. lure investment dollars away from countries with lower interest rates. As global financial markets become increasingly intertwined, investors can chase higher-yielding assets wherever they are.
And as the Fed raised interest rates, more money flowed into dollar-denominated assets, and the U.S. currency strengthened -- a simple case of supply and demand. Based on the latest exchange rates, for example, $1 fetches about 6.9 Chinese yuan, up from about 6.3 in early 2018.
The stronger dollar has made U.S. goods and services look more expensive and thus less attractive to foreign buyers, while foreign goods became cheaper and more enticing for U.S. importers, said Brad Setser, a former deputy assistant secretary for international economic analysis in the Treasury Department.
"Most economists believe trade policy plays a small part in determining the size of the trade deficit," Setser, now a senior fellow at the Council on Foreign Relations in New York, said in a phone interview. "The real drivers tend to be the strength of the dollar and other macroeeconomic policies."
Trump repeatedly has criticized Jerome Powell, his own appointee to head the Federal Reserve, for raising interest rates too far last year, and more recently for waiting too long to cut them.
Lower interest rates would, theoretically, weaken the dollar against foreign currencies and thus help to shift the advantage to U.S. exporters.
"The president isn't wrong to think that the dollar's strength has contributed to the trade deficit," Setser said..
The president's newly erected tariffs on Chinese goods have led to a drop in imports of things like telecommunication equipment, mobile phones, office machines and laptops, according to Bill Adams, senior international economist for the U.S. bank PNC.
But those have been offset by reduced U.S. exports to China of soybeans and food products such as pork and chicken, he said.
And unless U.S. manufacturers can cut their costs of production, the tariffs directed at China might ultimately just push U.S. importers to buy goods from other low-cost locales.
"Unless we change the behavior of the U.S. economy, the trade deficit will just be directed to other trading-partner countries," Adams said.
The latest data on trade, released June 26 by the Census Bureau, show that U.S. goods imports in May rose by an estimated 2.6% from a year earlier, while exports slipped by 2.5%.
The shift, driven by a deteriorating trade balance in autos, food and industrial supplies, boosted the overall trade deficit for the month to $74.6 billion, roughly 14% higher than in May 2018.
Treasury Department press officials didn't respond to a request for comment, but based on Trump's past statements, it's not a positive sign: "Trade deficits hurt the economy very badly," the president tweeted in April 2017.
In March 2018, he attributed the persistent shortfall of exports to "very stupid trade deals and policies."
And in June 2018, he wrote: "Why should I, as President of the United States, allow countries to continue to make Massive Trade Surpluses, as they have for decades, while our Farmers, Workers & Taxpayers have such a big and unfair price to pay?"
So far, though, that's exactly what he's doing - and then some.