Trade: Strong Import Growth Breaks U.S. Deficit Record

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The trade deficit keeps widening as imports continue to post strong gains. It hit a seasonally adjusted $74.4 billion in March, from a revised $70.5 billion in February — an increase of 5.6%. The U.S. economy has bounced back faster than most of its trading partners, resulting in imports strongly outpacing exports. The trade deficit is also widening because depressed global demand continues to hurt U.S. export growth. Stimulus has kept U.S. consumers spending through the pandemic, but restrictions on certain activities have diverted consumer spending from services to goods, many of which are imported. Widespread vaccinations in the United States will result in a slight shift in household consumption away from goods toward services, and a gradual normalization of activity in the services sector as the year progresses.

Strong import growth is a reflection of pandemic-induced demand. Despite ongoing transportation bottlenecks and port congestion, imports rose 6.3% to a historic $274.5 billion in March. Gains were broad-based, but much of the rise came from imports of consumer goods, particularly clothing, furniture, toys, footwear and appliances. Services imports also increased, thanks to gains in transport and travel-related services.

Exports of consumer goods will gain momentum as the global economy continues to improve through the year. Total exports rose 6.6% to $200 billion in March. All major categories of goods exports improved during the month, rising above their pre-COVID levels. Despite growing 1.4% in March, services exports continue to struggle amid restrictions related to COVID-19. As vaccine drives gain more momentum abroad and the global economic recovery picks up steam, export growth should continue to improve.

Sources: Department of Commerce, Trade Data