August 18, 2022

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WASHINGTON—Continued strong consumer appetite for overseas goods pushed up the U.S. trade deficit in December,...

WASHINGTON—Continued strong consumer appetite for overseas goods pushed up the U.S. trade deficit in December, sending the full-year import-export gap to a record level in 2021.
The full-year trade deficit in goods and services for 2021 increased 27% to $859.1 billion, larger than the previous record of $763.53 billion in 2006, the Commerce Department said Tuesday. Annual trade balance records date to 1960.

“Economic activity was up, prices were higher and the U.S. economy was growing, all of which contributed to more imports and the rise of the trade deficit,” said
Jake Colvin,
president of National Foreign Trade Council, a group representing various U.S. businesses. “We expect global trade to continue to surge past its pre-pandemic levels in 2022…though perhaps at a slower rate.”
The sharp increase in the trade deficit comes as the U.S. economy continues to recover strongly from the pandemic-induced slump during 2020. American consumers have spent heavily on imported goods such as computers, game machines and furniture, flush with stimulus money while less willing to splurge on travels and dining out due to health concerns. Robust demand for capital goods from businesses, as well as higher prices of energy and food items, have also added to U.S. import bills.
Trade figures aren’t adjusted for inflation, so growth in exports and imports partly reflect higher prices.
Adding to the deficit for 2021 were depressed levels of service exports, which account for a third of U.S. overall exports. The declines reflect sharply lower spending in the U.S. by foreign tourists and students at American colleges and other schools. The surplus in services trade fell 5.6% to $231.5 billion in 2021.
That trend could change in the coming months, leading to a gradual decline in overall deficit, economists say.

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“Assuming we don’t have another variant, economic activities continue to warm and people start traveling more, we are expecting services exports to really pick up later in the year, so there should be a more balanced trade growth overall,” said
Mahir Rasheed,
U.S. economist for Oxford Economics, a U.K.-based research firm.
The International Monetary Fund estimates the U.S. economy grew by 5.6% in 2021, faster than most advanced economies whose average growth rate was 5%.
Amazon.com Inc.,
which sells imported goods among other offerings, last week said that its sales grew last year from 2020, a year when many consumers turn to online shopping during pandemic lockdowns.
Workers in the company’s retail division, “have effectively operated in peak mode for almost two years,” Amazon Chief Executive
Andy Jassy
said when announcing the company’s earnings.
In December, the U.S. trade deficit grew by 1.8% to a seasonally adjusted $80.7 billion, just less than the record deficit of $80.8 billion in September, the Commerce Department said.
Imports rose 1.6% in December to $308.9 billion, growing more quickly than exports, which expanded by 1.5% to $228.1 billion. Imports were bolstered by strong consumer demand for cellphones, toys and automobiles, while the growth in exports were supported by pharmaceutical preparations, auto and auto parts and nonmonetary gold.
The increases in December exports and imports suggest global supply chain problems are easing, said
Andrew Hunter,
senior U.S. economist for Capital Economics, a research firm. “Trade in both directions appears to have benefited from easing congestion at U.S. ports towards the end of last year,” he wrote in a research note Tuesday. He noted that the widening deficit will continue to push down the overall economic growth rate during the first quarter of this year.

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The Covid pandemic has strained global supply chains, causing freight backlogs that have driven up costs. Now, some companies are looking for longer-term solutions to prepare for future supply-chain crises, even if those strategies come at a high cost. Photo Illustration: Jacob Reynolds

Trade deficit with China grew 14.5% for the full year to $355.3 billion, as U.S. demand for Chinese goods surged amid -pandemic economic recovery. The level was still well below the record trade deficit of $418.2 billion the U.S. set with China in 2018.
A trade pact with China implemented by former President Donald Trump to reduce the bilateral deficit with Chinese purchase commitments for U.S. goods expired on Dec. 31. Economists say China had fallen sharply behind the goals to purchase more manufactured and agricultural goods and energy products under the so-called Phase One agreement, creating pressure for the Biden administration to hold Beijing accountable for falling short.
Sarah Bianchi, deputy U.S. Trade Representative, said the U.S. is “actively engaged with China” to address bilateral trade issues. “It’s really clear that the Chinese have not lived up to their Phase One commitment,” she said last week during a panel discussion, referring to the bilateral agreement. “That’s something we’re trying to address.”
U.S. officials haven’t said what measures they will take to respond to China’s failure to meet the purchase commitments.
“The U.S. must create a pathway to a new normal beyond the Phase One deal that benefits American businesses and workers,” NFTC’s Mr. Colvin said, adding that policy makers shouldn’t focus on trade deficits and purchase commitments to hammer out ways to deal with economic relations with China.
The confrontational trade policy against China featuring higher tariffs and import targets, which was initiated by Mr. Trump, and largely kept in place by President Biden, has had an impact to encourage U.S. businesses to diversify their operations in Asia and sources of imports. The trend accelerated during the pandemic.
Imports from China in 2020 and 2021 were about 5% lower than totals for 2018 and 2019, the two years before the pandemic began, according to government trade data. Meanwhile, imports from other Asian nations increased substantially during the pandemic. Imports from Vietnam were up 57% in 2020-21 compared with 2018-19, fueled by electronics and furniture purchases. Taiwan, Thailand and Malaysia also saw double-digit percentage imports increases for those periods.
The U.S. also saw imports from Switzerland jump about 61% in 2020-21 compared with the two years prior. The increase was largely fueled by a spike in imports of gold and other precious metals.
Write to Yuka Hayashi at [email protected] and Anthony DeBarros at [email protected]

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U.S. Trade Deficit Hit Record in 2021 as Americans Spent on Computers, Games, Furniture appeared first on maserietv.com.