The numbers: The nation’s trade deficit climbed 9.4% in January to a record $89.7 billion as the U.S. bought more foreign oil, autos and other goods. High prices due to soaring inflation and fewer shipments of coronavirus vaccines also played a role.
The deficit rose from a revised $81.9 billion in December, which was also an all-time high.
Last year, the U.S. posted the highest trade deficit ever. The record gap mostly stemmed from the U.S. recovering faster than other countries. Imports have surged while the growth in American exports has lagged behind.
A higher international trade deficit subtracts from gross domestic product, the official scorecard for the U.S. economy. The record deficit is expected to reduce forecasts for first-quarter growth.
Key details: U.S. imports rose 1.2% in January to a record $314.1 billion, the government said Tuesday. Imports have topped $300 billion for three months in a row for the first time ever.
The U.S. imported more foreign autos, oil, natural gas and copper. Prices for oil and other commodities also rose last month to explain part of the increase in the value of imports.
Exports of U.S.-made goods dipped 1.7% to $224.4 billion, the smallest amount in four months. The decline mostly stemmed from fewer shipments of pharmaceutical drugs.
The surge in the trade deficit over the past several months partly reflects U.S. ports trying to clear a backlog of goods that have piled up in nearby warehouses or on ships waiting to unload.
Big picture: The U.S. has run large trade deficits for years and there’s little sign the trend is going to reverse anytime soon. American economic growth is still outpacing the rest of the world and the Russian war on Ukraine threatens to delay a full global recovery.
The trade deficit is likely to remain at or near record levels until the rest of the works catches up to the U.S. and buys more American-made products and services.
Looking ahead: “The deficit is poised to remain elevated for now on ongoing strong demand for imports,’ said Rubeela Farooqi, chief U.S. economist
“Sanctions will cut off almost all trade between the U.S. and Russia over the coming months, but with that trade only a trivial amount of the total, that will have little impact on the headline trade figures,” said U.S. economist Michael Pearce of Capital Economics.
Market reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
were set to slightly lower in Tuesday trades. Stocks have fallen sharply since the Russian invasion of Ukraine.
