According to data released by the US Department of Commerce on Tuesday (7th), the US trade deficit in goods and services in December last year was 67.4 billion US dollars, of which imports increased by 1.3% compared with November, and exports decreased by 0.9%. The full-year trade deficit hit a record $948.1 billion, up 12.2% from 2021, largely due to a surge in imports.
Some foreign media pointed out that last year, the export volume of the United States grew due to the global demand for American-made products, but the strengthening of the dollar increased the cost of American products, which widened the annual deficit.
And with the deficit expected to widen again in January, economists believe trade may not support the economy in the first quarter of this year after contributing to gross domestic product (GDP) growth for three consecutive quarters.
Christopher Rupkey, chief analyst at FWDBONDS, said the wind has turned and is no longer blowing strongly in the direction of positive economic growth. While the economy is not in trouble, judging by today’s trade deficit figures, it may not contribute much.
Although US imports grew in December last year, the Commerce Department noted that total imports of goods and services have declined for two consecutive quarters in the third and fourth quarters of last year. In fact, not only the United States, but also the world’s international business was weak late last year. For example, trade in Europe fell sharply towards the end of the year, reflecting weak internal and external demand. Germany’s imports and exports of goods fell 6.1% and 6.3%, respectively, in December.
Shannon Seery, an analyst at Wells Fargo & Co. in New York, said slowing growth overseas is likely to continue to weigh on demand for U.S. exports. At the same time, demand for consumer durable goods is slowing after being pulled down during the pandemic, and this, coupled with a gradual deceleration in capital expenditure investment, is weighing on U.S. imports from the rest of the world.
Gregory Daco, chief economist of Ernst & Young, one of the Big Four accounting firms, commented that the trade trend reflects the subsidence of the impact of the new crown epidemic, business normalization, and supply and demand are in balance. But global demand for U.S. exports has slowed, and imports could come under pressure “in an environment of slower growth in consumer spending and business investment.”
On the other hand, U.S. services exports rose $700 million to a record $82 billion, boosted by travel, shipping and other business services. The trade surplus in services was the highest since December 2019, and China’s reopening is likely to support services exports.
Veronica Clark, an economist at Citigroup in New York, said trade services will be the focus of attention in the coming months. The reopening of China could bring Chinese tourists and students back to the US in large numbers, which would be reflected in stronger service exports.
U.S. goods deficit with China hit second highest on record last year
It is worth noting that in inflation-adjusted data released by the U.S. Department of Commerce, merchandise trade between the U.S. and China reached $690.6 billion last year, setting a record for the year set in 2018. And last year, the U.S. goods deficit with China expanded by 8% to $382.9 billion, the second largest annual deficit on record, second only to the record deficit of $419.4 billion in 2018.
Total U.S. merchandise exports to China rose to a record $153.8 billion last year, while imports rose to $536.8 billion, second only to the annual record set in 2018.
Some media pointed out that although the relationship between the two major economies is tense, there are few signs that the commercial relationship between the two parties has broken down. William Reinsch, a former senior executive of the U.S. Department of Commerce and now a senior consultant at the Center for Strategic and International Studies (CSIS) in Washington, commented: “The data show that consumers have their own ideas. Regardless of the government, at the market level, both countries are still developing. Lots of business, macro relationships haven’t changed much, still lots of deals.”