The US trade deficit hit a record $859.1 billion last year as Americans splurged on foreign-made electronics, toys and clothing during the surprisingly robust economic recovery after a short but unpleasant pandemic fueled recession of 2020.
The trade gap – the difference between what the United States sells and what it buys abroad – jumped 27% last year, from $676.7 billion in 2020. US exports rose 18% to more than $2.5 trillion. But imports rose further, climbing 21% to nearly $3.4 trillion.
With millions of people sheltering at home, expenses for restaurant dinners, movies or concerts evaporate. This money was transferred almost overnight into goods such as mobile phones, garden equipment or furniture. And generous government relief checks have given them the financial means and confidence to do so with enthusiasm.
Imported goods jumped 21% last year to $2.9 trillion. Goods imported from China rose 16% to $506.4 billion last year, and the goods trade deficit with the Chinese rose nearly 15% to $355.3 billion.
Overall, the United States recorded a $1.1 trillion deficit in merchandise trade with the rest of the world, the first time the gap reached $1 trillion. This was partly offset by a US$231.5 billion surplus in services such as banking, education and tourism.
“The world is not yet back to normal with respect to the pattern of trading goods and services that existed before the pandemic,” said Christopher Rupkey, chief economist at financial website fwdbonds.com. But Rupkey said the gap could narrow if COVID-19 cases decline, allowing more foreign tourists to visit the United States; their travel expenditures count as an export of US services.
President Donald Trump has sought to reduce the United States’ long-running trade deficit (it hasn’t had a trade surplus since 1975) by imposing taxes on foreign goods.
The Biden administration kept Trump tariffs on about $360 billion in Chinese imports, but gradually reduced levies on U.S. allies. On Monday, for example, the United States agreed to essentially lift Trump’s 25% tariff on Japanese steel imports.
In December, the trade deficit increased nearly 2% to $80.7 billion.