By Paul Kiernan and Josh Zumbrun 

WASHINGTON -- The U.S. trade deficit in goods hit a record in 2018, defying President Trump's efforts to narrow the gap, as imports jumped and some exports, including soybeans and other farm products, got hammered by retaliation against U.S. tariffs.

The deficit in goods grew 10% last year to $891.3 billion, the widest on record, according to Commerce Department data released Wednesday. The U.S.'s trade gaps with China and Mexico, already the largest, reached new records.

The trade picture looks less dire when services including tourism, higher education and banking are counted, though this deficit still deteriorated markedly. With services included, the trade gap grew 12% last year to $621 billion, the widest since 2008.

"The fact that the U.S. economy is doing very well is the main reason the trade gap has risen," said Kenneth Rogoff, a professor at Harvard University and former chief economist at the International Monetary Fund.

Overall U.S. imports grew 7.5% last year, driven in part by spending on consumer goods, industrial supplies and capital goods. Americans stepped up imports from China, purchasing more TVs, auto parts, videogames and furniture. Exports grew too, but only 6.3%.

"Policies that play around at the margins with tariffs are always going to get swamped by macroeconomic factors," Mr. Rogoff said. "That's what happened, as everyone predicted."

Over the past year, President Trump imposed tariffs on around $300 billion worth of goods that the U.S. imports from other countries, particularly China, in hopes of giving American producers a competitive edge.

He also publicly lambasted companies that outsourced jobs, renegotiated pacts with major U.S. trade partners including Mexico, Canada and South Korea, and rankled longtime European allies by deeming their steel and aluminum exports a threat to national security.

The strategy brought trading partners to the table for intense negotiations. The president's advisers have argued they are playing a long game and the benefits to renegotiating trade deals will pay dividends over time. The White House didn't immediately respond to a request for comment on the new data.

Peter Navarro, one of the president's top trade advisers, wrote in a New York Post opinion column Tuesday that the president's trade agenda has been a success. "The results are undeniable: Last year, the United States created 284,000 new manufacturing jobs, the largest increase in 21 years," he wrote.

The goods deficit widened most last year with China, the U.S.'s largest commercial partner and the main focus of White House trade efforts. The deficit widened by $44 billion to $419 billion in 2018.

Beijing slammed the brakes on purchases of key American exports, especially agricultural products like soybeans, wheat and sorghum. China's purchases of those three crops dropped by nearly $10 billion last year.

Prices also dropped midyear, when they often see a seasonal uptick, as China started buying a lot of soybeans from Brazil instead of the U.S. That forced some American farmers who had been holding on to their soybeans in hopes of better prices to sell at a loss, said Bill Gordon, who plants around 2,000 acres of soybeans and corn in Minnesota.

"It's really tough," Mr. Gordon said. "There's a lot of farms that are going bankrupt now."

The U.S. trade deficit in goods also widened with other trading partners that are the focus of Mr. Trump's policies, including the European Union and Mexico.

The gap widened by $18 billion with the EU and by $11 billion with Mexico. China, the EU and Mexico account for about 54% of U.S. goods imports but made up 86% of the increased deficit.

The report showed the gap worsened at the end of the year, suggesting the forces that are driving the deficit expansion are intensifying and not abating. The overall monthly trade gap in December was the widest since 2008, jumping 19% from the prior month to a seasonally adjusted $59.8 billion. Economists surveyed by The Wall Street Journal had expected a $57.3 billion gap.

Many economists believe the shortfall is fueled in part by another Trump administration policy: tax cuts and resulting capital-spending increases that juiced demand from U.S. consumers and businesses as growth in the rest of the world was slowing.

Concern that the U.S. economy could overheat prompted the Federal Reserve to raise interest rates four times in 2018, contributing to a strong dollar in the second half of the year that made foreign goods relatively cheap for Americans

"Higher take-home incomes for households have definitely proven to be very conducive to imports," said Pooja Sriram, an economist at Barclays. "The outcome has been in almost the opposite direction of what the administration has wanted."

Andrew Hunter, an economist at Capital Economics, said the trends that drove the deficit in 2018 are likely to continue in early 2019, with imports set to grow while weaker global demand weighs on exports.

"Trade now looks set to be a more serious drag in the first quarter," Mr. Hunter said in a note to clients. He estimates annualized gross-domestic-product growth will slow to 1.5% in the first three months of 2019 from 2.6% in the fourth quarter.

Write to Paul Kiernan at paul.kiernan@wsj.com and Josh Zumbrun at Josh.Zumbrun@wsj.com

(END) Dow Jones Newswires

March 06, 2019 14:41 ET (19:41 GMT)

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