The US economy is recovering much faster than the rest of the world, a reality reflected in trade numbers as the gap widens. Americans are starting to spend again, while US exporters face sluggish foreign demand in countries that are slow to recover.
The U.S. trade deficit hit a record $74.4 billion in March as the improving U.S. economy boosted purchases of imported foreign goods.
The deficit, the gap between what the United States buys abroad and what it sells to other countries, was 5.6% higher than February’s $70.5 billion gap. , the Commerce Department reported Tuesday.
Imports rose 6.3% to $274.5 billion, while exports rose 6.6% to $200 billion. The United States imports so much more than it exports only in dollar terms, the rise in imports has been greater.
The politically sensitive trade deficit with China rose 11.6% to $27.7 billion, which as usual was the largest deficit with a single country.
In the first three months of this year, the US trade deficit stands at $212.8 billion, up 64.2% from the deficit in the same period last year, at a time when the he US economy was essentially crippled by the coronavirus pandemic.
The United States posted a deficit for all of 2020 of $681 billion, the largest annual gap since 2008 as the coronavirus disrupted global trade and thwarted President Donald Trump’s “America First” policy.
The U.S. economy is recovering much faster than the rest of the world and this is affecting trade numbers as the gap widens. Americans are starting to spend again, while US exporters face sluggish foreign demand in countries that are slow to recover.
“Stronger U.S. growth relative to trading partners will drive the trade deficit higher in 2021,” said Oren Klachen, chief U.S. economist. “US domestic demand will continue to put strong pressure on imports, thanks to improved sanitary conditions, reopenings and a historic fiscal expansion.”
During his four years in office, Trump pursued a hardline trade strategy that used punitive tariffs on other countries’ products to eliminate U.S. trade deficits with the rest of the world and restore millions of manufacturing jobs. lost.
Trump has sought to narrow the trade gap by imposing tariffs on imported goods on a scale not seen since the 1930s trade wars that helped push the United States and the rest of the world into a Great Depression.
Trump’s efforts have failed to change trade imbalances and have angered US allies as well as competitors such as China. So far, however, the Biden administration has not reversed Trump’s policies.
Some analysts say President Joe Biden is proceeding with caution because reversing all of Trump’s policies could increase risks for a union-friendly Democrat. Unions have long complained about US free trade policies before Trump.
In March, the United States’ surplus in services trade, items such as airline flights and consultancy fees, fell to a new decade low of $17.1 billion, a decline that analysts blamed on COVID-19 restrictions that limited tourism. Normally, the United States is able to reduce its overall deficit by a larger amount through larger surpluses in trade in services.
The goods deficit totaled a record $91.6 billion in March, compared with a deficit of $87.9 billion in March.