US trade deficit soared to a record in 2021 as imports outweighed exports

The trade deficit rose 27 per cent as Americans continued to spend heavily on goods made in foreign factories during the pandemic. PHOTO: AFP

LOS ANGELES (NYTIMES) - The United States trade deficit in goods soared to record levels in 2021, topping US$1 trillion ($1.35 trillion) as Americans continued to spend heavily on computers, toys, bicycles, clothing, pharmaceuticals and other goods made in foreign factories during the pandemic.

The overall trade deficit in both goods and services also hit an annual record, rising 27 per cent as the country's imports far outpaced its exports, according to data released by the Commerce Department on Tuesday (Feb 8).

The widening deficit - which climbed to US$859.1 billion from US$678.7 billion the previous year - was a reflection of a highly unusual pandemic economy. Americans, sheltering at home from the coronavirus and with savings swelled by government relief packages, slashed their spending on travel, restaurants and movies and splurged on furniture, electronics and other goods instead.

It is also the latest sign of how dependent the US remains on other countries, particularly China, for the things that consumers want to buy. While both current US President Joe Biden and former president Donald Trump have talked about reviving US manufacturing, the country continues to be deeply reliant on factories in China and other low-cost countries to produce a vast array of consumer goods.

Imports surged by US$576.5 billion, or 20.5 per cent, last year, as both the quantity and the price of the foreign products that Americans purchased increased. Exports grew 18.5 per cent, or by US$394.1 billion. Demand for foreign goods was so strong that it snarled global supply chains and clogged US ports, in some cases making it difficult for some exporters to get their products out of the country.

The slowdown in demand during the pandemic for services, usually a strength for the economy, also pushed up the trade deficit, as foreigners drastically reduced their spending on tourism in the US.

The US typically records a large trade surplus in services, which is subtracted from the overall deficit. Last year, the trade surplus fell 5.6 per cent to US$231.5 billion. For the month of December, the goods and services deficit rose 1.8. per cent to US$80.7 billion.

The ballooning trade deficit subtracted more than 1 percentage point from economic growth figures last year, more than it has in decades. And both Republicans and Democrats appeared likely to seize on the number to criticise the government for failing to curb America's dependence on foreign goods.

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