In January, the American trade deficit soared to new heights as the nation imported far more than it exported. As a result of the latest data, the United States may experience additional declines in economic growth in the first quarter of 2022.
On Tuesday, the Commerce Department announced that the trade deficit soared to its highest level ever, with an $87.9B deficit representing a 9.4 percent increase for the month of January. In December, the data was revised to reveal a $82B shortfall, rather than the $80.7B that was previously reported.
According to Rubeela Farooqi, who serves as the chief U.S. economist at High Frequency Economics, “the deficit is poised to remain elevated for now on ongoing strong demand for imports.”
Economists previously forecast an $87.1B deficit for the month of January, according to a poll from Reuters. In the past six quarters, trade has reduced gross domestic product (GDP) growth, with growth estimates for the first quarter of 2022 falling below a 2.0 percent annualized rate.
In the court quarter of 2021, the economy grew at a 7.0 percent rate, largely due to the loosening of COVID restrictions and other measures across the nation.
However, the trade deficit threatens continuous GDP growth, especially since imports increased by 1.2 percent to $314.1B, which is the highest amount ever recorded. Furthermore, the imports of goods surged by 1.8 percent to reach a record high of $264.8B.
Some of the most highly demanded goods include capital and consumer goods, alongside various food products.
Furthermore, non-petroleum imports also sailed to new heights, especially as businesses work to restore inventories to address strong demand on the domestic front.
In addition to the high level of imports, several prices for goods have also increased dramatically given the backlog at ports due to ongoing labor shortages.
Thus far, economists perceive a relatively limited effect on trade from Russia’s ongoing war in Ukraine, as the United States has imposed trade sanctions on Moscow in response to Putin’s actions. However, in the past year, Russian goods have accounted for only 1 percent of imports and 0.4 percent of exports, per data from the government.
According to Michael Pearce, who serves as a senior U.S. economist at Capital Economics, “sanctions will cut off almost all trade between the U.S. and Russia over the coming months.”
“[However] … that will have little impact on the headline trade figures,” Pearce continued.
In addition to the gloomy picture regarding imports, exports of American products also fell by 1.7 percent, totaling just $224.4B. While capital goods exports, including industrial supplies, increased, exports of consumer goods decreased.
Furthermore, exports of services decreased by $1.6B, falling to $68.5B as a result of declines in transportation and travel.