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U.S. Trade Deficit Widens, Reaching 10-Month High

U.S. Trade Deficit Widens, Reaching 10-Month High

Apr 4, 2024

U.S. Trade Deficit Widens, Reaching 10-Month High

Recent data from the Bureau of Economic Analysis (BEA) indicates that the U.S. international trade deficit has widened significantly, hitting the highest level in 10 months. The deficit increased to $68.9 billion in February, up from $67.6 billion in January, marking the most substantial shortfall since April of the previous year.

The growth in the deficit comes as exports rose by 2.3 percent to a record $263 billion, with significant contributions from civilian aircraft, crude oil, and soybeans, despite a dip in passenger car exports. At the same time, imports saw a 2.2 percent increase, reaching a 14-month high of $331.9 billion, driven by consumer goods such as automobiles, household items, mobile phones, and pharmaceutical products.

Despite these figures, the U.S. achieved trade surpluses with regions including Central and South America, the Netherlands, Hong Kong, and Australia. However, considerable trade deficits were recorded with China, the European Union, Mexico, and Vietnam.

The BEA's report comes as the trade deficit trajectory has seen an upward trend after hitting a three-year low in August of the previous year, still notably below the record trade gap of $102.5 billion set in March 2022. The fourth-quarter data showed a 0.25 percent contribution to the 3.4 percent GDP growth rate, following two quarters without growth contributions from trade.

Economists are closely watching the impact of these trade figures on the GDP data for the first quarter, with the Federal Reserve Bank of Atlanta's GDPNow Model estimating a 2.5 percent growth from January to March.

The aftermath of COVID left the international supply chain struggling with increased costs and delays. Although conditions have stabilized, recent incidents like the crisis in the Red Sea, the Panama Canal bottlenecks, and the Baltimore bridge disaster continue to challenge the shipping industry. The New York Fed's Global Supply Chain Pressure Index (GSCPI) suggests trade flows have been relatively normal since October of the previous year.

The current U.S. administration is actively diversifying its trade policy, aiming to reduce reliance on China, foster better partnerships in the Asia-Pacific, and promote reshoring of industries to the U.S.

During her upcoming visit to Beijing, Treasury Secretary Janet Yellen emphasized the administration's concerns about China's influence on the global economy through the production of cheap green energy technology. "We need to have a level playing field," Yellen stated, focusing on the issue of overcapacity driven by massive investments in China.

The U.S. agricultural exports have seen a decline after reaching a peak in the second quarter of 2022. The U.S. Department of Agriculture (USDA) reported a more than 4 percent drop in the October-December period, with exports totaling $191 billion in 2023, a 10 percent decrease from 2022. The USDA attributes this downturn to falling commodity prices and shipment volumes, with notable decreases in beef, corn, sorghum, and wheat.

Critics, including Sen. John Thune (R-S.D.), have pointed to the Biden administration's trade policies as contributing factors to the decline in U.S. agricultural exports. Republican senators have called for a more ambitious trade strategy to expand market access and reduce various barriers to trade.

As the U.S. navigates these complex trade dynamics, the implications for the economy and global trade relations remain in focus. Treasury Secretary Yellen's discussions in Beijing and the administration's trade strategy will be pivotal in shaping the future of U.S. international trade.

Originally reported by The Epoch Times


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