U.S. Trade Deficit Hits Record High in February
WASHINGTON – The U.S. trade deficit surged to a record high in February as the nation’s economic activity rebounded more quickly than that of other nations carefully shake off the economic hardships associated with the coronavirus pandemic.
The trade deficit jumped 4.8% to a record $71.1 billion in February, the Commerce Department said on Wednesday.
Imports slipped 0.7% to $258.3 billion. Goods imports fell 0.9% to $219.1 billion.
Analysts said the drop likely reflected supply-chain constraints, rather than weak domestic demand. In fact, imports of capital goods hit a record high, while those of industrial supplies and materials were the highest since October 2018.
Exports dropped 2.6% to $187.3 billion. Exports of goods tumbled 3.5% to $131.1 billion, likely hurt by unseasonably cold weather that crippled Texas and slowed activity across a large swath of the country.
Former President Donald Trump made the trade deficit one of the boggymen of his 2016 campaign, and once elected, he started a series of of trade wars to force trading partners to renegotiate longstanding trade agreements.
So far, President Joe Biden’s trade representative, Katherine Tai, has suggested she will keep many of the tariffs in place until negotiated settlements can be reached with the United States’ trade partners. Already, hiowever, as previously reporteed by The Well News, there has been some reduction in trade tensions, particularly when it comes to the United Kingdom and the European Union.
When adjusted for inflation, the goods trade deficit shot up to a record $99.1 billion in February from $96.1 billion in January. The so-called real trade deficit is running well above the average for the October-December period.
That suggests trade could subtract from GDP growth in the first quarter, which would be the third straight sluggish quarter.
But that is unlikely to have an impact on first-quarter GDP growth estimates, currently as high as a 10% annualized rate. The economy grew at a 4.3% pace in the fourth quarter.
Economists expect growth this year could top 7%, which would be the fastest since 1984. The economy contracted 3.5% in 2020, the worst performance in 74 years.
On Tuesday, the International Monetary Fund forecast that the global economy to expand 6% this year, driven primarily by the U.S. economy, which the fund estimated would grow by 6.4%.
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