The US trade deficit has soared past $1 trillion in 2021 for the first time on record, government estimates from the Census Bureau show. For the past year, the figure rose to an unprecedented $1.08 trillion from $893.5 billion in 2020, a record high of its own.
The goods-trade gap jumped 3% in December alone to $101 billion, posting the biggest monthly increase to date. Analysts explain the situation with the shift of consumer focus to imports of a variety of non-US-made products, like toys, smartphones, and appliances.
“Strong demand and shifting consumer preferences during the pandemic led to a surge in imports that continues to outstrip exports and is contributing to all-time highs in the deficit,” Rubeela Farooqi, chief US economist at New York-based High Frequency Economics, told Reuters.
Analysts add that while the US showed a speedy recovery after the Covid-19 pandemic-induced crisis, enabling citizens to boost their spending on goods, many other countries lagged behind in their economic rebound, which made the demand for US exports slower to recover. More simply put, Americans could afford to purchase more non-US-made goods, and that’s what they did.
Experts say the deficit may narrow when the global recovery catches up, but with the Omicron variant still at large, this may take a while.
“The Omicron variant threatens to fuel an even wider deficit as virus concerns weigh on global growth and tourism, putting downward pressure on US exports, while domestic goods demand stays robust,” Mahir Rasheed of Oxford Economics told Market Watch.
More specific numbers on the trade deficit are expected next week when the full December report on the US trade balance is due to be published.