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The US has a new historic trade deficit

The US has a new historic trade deficit

The Commerce Department said on Wednesday that the U.S. trade deficit in February widened by 4.8 percent to $71.1 billion (59.8 billion euros). Economists polled by Reuters were expecting an average deficit of 70.5 billion.

 

Buoyed by a faster economic recovery than in the rest of the world, notably thanks to the $1.9 trillion economic stimulus package and infrastructure projects, the US trade deficit reached record levels in February.

 

“Faster US growth than the rest of the world has pushed the trade deficit to record levels,” commented Oren Klachkin, an economist at Oxford Economics, in a note, anticipating that it “should continue to widen as the US recovery gathers pace in the spring and summer”.

 

The widening of the deficit by 4.8% compared with the previous month was driven by a 2.6% drop in exports to $187.3 billion, which was greater than the decline in imports to $258.3 billion (-0.7%).

 

Imports of capital goods reached a record high and imports of industrial supplies and raw materials reached their highest level since October 2018.

 

“The improved health situation, the reopening of the economy and fiscal spending will boost domestic demand and put strong pressure on imports” while exports, dependent on the slower recovery of the economy in the rest of the world, will be less powerful” adds Oren Klachkin.

 

For goods alone and by geographical area, the trade deficit with China has widened by about 10% over a month. On the other hand, it has been clearly reduced by 42% with Mexico and has fallen by 5% with the European Union.

 

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However, at the last monetary policy meeting organised by the US Central Bank (Fed), its boss Jerome Powel sought to reassure that the institution’s purchases of government bonds and low interest rates continued to be justified until “substantial progress” in the economy was demonstrated. Thus, the risk of inflationary pressures is described as “broadly balanced” at the Fed meeting, and the US central bank confirms that its commitment to supporting the economy remains unchanged.

 

In addition, the International Monetary Fund (IMF) revised its growth forecasts for the United States very sharply upwards on Tuesday, to 6.4% for 2021 (+1.3 points) and 3.5% for 2022 (+1 point), estimating that it is “the only major economy” whose 2022 GDP will exceed the forecast that was made before the pandemic.

 

Read also > United States : JOE BIDEN’S STIMULUS PACKAGE AND ITS FUTURE IMPACT ON THE GLOBAL ECONOMY

 

Featured Photo : © Press

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