Economic Recovery Pushed 2021 US Trade Deficit To Record

Continued strong consumer appetite for overseas goods pushed up the US trade deficit in December, sending the full-year import-export gap to a record level in 2021.

The December deficit in trade of goods and services grew by 1.8% to a seasonally adjusted $80.7 billion, the Commerce Department said Tuesday, just less than the record deficit of $80.8 billion in September.

The full-year trade deficit for 2021 increased 27% to $859.1 billion, larger than the previous record of $763.53 billion in 2006. Annual trade balance records date to 1960.

The sharp increase in the trade deficit comes as the US economy continues to recover strongly from the pandemic’s retreat 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.

Healthy demand for capital goods from businesses, as well as higher prices of energy and food items, have also added to US import bills. The International Monetary Fund estimates the US economy grew by 5.6% in 2021, faster than most advanced economies whose average growth rate was 5%.

In December, imports rose 1.6% to $308.9 billion, growing more quickly than exports, which expanded by 1.5% to $228.1 billion, the Commerce Department said. 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.

Trade deficit with China grew 14.5% for the full year to $355.3 billion, as US demand for Chinese goods surged amid the post-pandemic economic recovery. The level was still well below the record trade deficit of $418.2 billion the US 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 US goods expired on Dec. 31. Economists say China had fallen sharply behind the goals, creating pressure for the Biden administration to hold Beijing accountable for falling short.

US officials haven’t said what measures they will take to respond to China’s failure to meet the purchase commitments.

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.