When a country's imports exceed its exports over a given time period, it has a trade deficit.
In March 2022, the United States' monthly trade deficit grew by $20 billion to $109.8 billion. In March, however, U.S. exports increased by $12.9 billion to $241.7 billion. Imports totaled $351.5 billion, up to $32.9 billion from February. Imports increase the deficit, whereas exports decrease it.
Important Points to Remember
- When a country imports more than it exports, it has a trade deficit.
- The U.S. trade deficit grew from $676.7 billion in 2020 to $859.1 billion in 2021, up from $676.7 billion in 2020.
- In March 2022, the United States' monthly trade deficit reached $109.8 billion.
- Imports of consumer goods are the main source of the U.S. trade deficit.
Annual Trade Deficit in the United States
The trade deficit was $288.8 billion in the first quarter of 2022. In both 2020 and 2021, that number is higher than in the first quarter. As per the U.S. Bureau of Economic Analysis, the annual total for 2021 was $859.1 billion (BEA). In 2020, the United States imported $3.4 trillion in goods and services, up to $576.5 billion from the previous year. Exports totaled $2.5 trillion, up to $394 billion from the previous year.
The trade deficit in 2021 was significantly higher than the trade deficit in 2020, which was $676.7 billion. In 2021, the COVID-19 pandemic and supply chain issues significantly impacted imports. The current deficit surpasses the previous high point of $763.5 billion set in 2006.
What Causes the Trade Deficit in the United States?
The primary drivers of the trade deficit are consumer goods. The United States imported nearly $2.9 trillion worth of consumer goods in 2021 while exporting nearly $1.8 trillion. This resulted in a $1.1 trillion goods deficit, which is the highest on record.
Note: The United States exported $196.1 billion in petroleum in 2021, the highest amount ever. It includes crude oil, natural gas, fuel oil, and other petroleum-based distillates like kerosene. An oversupply of oil has resulted from the development of new shale oil fields in the United States.
The United States of America is a net exporter of services
Services exports in the United States totaled $771.2 billion in 2021, up to $65.6 billion from the previous year. It reflects a $15.3 billion annual decrease in the services surplus to $230 billion in 2021. Despite lower numbers than usual, U.S. services remain competitive in the global market. The surplus helps to compensate for the goods deficit.
The largest contributor to the surplus, at over $206 billion, was other business services. In 2021, other major contributors included:
- $164.1 billion in financial services
- $124.8 billion in intellectual property
- $68.7 billion in travel
- $65 billion for transportation
The United States' Main Trading Partners
The United States had a $915.0 billion trade deficit with its top ten trading partners in 2021.
The deficit in the Country (in billions)
The Impact of the Dollar's Value on the Trade Deficit
From 2001 to 2008, the dollar lost ground against the euro. This meant that Europeans could get cheaper goods and services from the United States. As a result, American businesses became more competitive, resulting in increased exports.
The 2008 recession wiped out this advantage, resulting in a drop in global trade. Despite the dollar's continued strength since 2009, the euro has weakened as a result of the Eurozone crisis. The dollar weakened briefly in 2017 but recovered in 2018 and into the first half of 2020. Exports are harmed as a result of this. Despite the dollar weakening in 2020, it grew strongly in 2022. The dollar reached a five-year high in April 2022.
It's important to remember that oil is priced in U.S. dollars. The Organization of Petroleum Exporting Countries (OPEC) raises prices to maintain revenue as the dollar falls. Because the United States relies on oil, it will be difficult to reduce the Country's trade deficit.
The Trade Deficit Hurts the U.S. Economy in a Variety of Ways
Because it is financed with debt, a persistent trade deficit is harmful to the economy. Because it borrows from its trading partners, the United States can buy more than it produces. It's like going to a party where the pizza place keeps sending you pizzas and then charging you for them. It can only go on for as long as the pizzeria has faith in your ability to repay the loan.
The lending countries may decide to ask America to repay the debt at some point in the future. This, however, is unlikely to occur because it would have a negative impact on those countries' currencies.
Another issue with the trade deficit is the statement it makes about the U.S. economy's competitiveness. When American companies buy goods from other countries for a long time, they lose their expertise and even the factories that make those products. As the Country's competitiveness deteriorates, more jobs are outsourced, lowering the Country's standard of living.
Most Commonly Asked Questions (FAQs)
What is the current trade deficit in the United States?
According to the U.S. Census Bureau and the U.S. Bureau of Economic Analysis, the goods and services deficit in March 2022 was $$109.8 billion, up to $20 billion from February's figures.
How long has the United States been a trade deficit country?
Since the mid-1970s, the United States has had an annual trade deficit. As the United States entered the third stage of industrialization, the shift from surpluses to deficits coincided with a structural change in the economy. U.S. financial assets became more appealing to foreign investors.
Which Country Does the United States have the largest trade deficit?
With a trade deficit of $48.6 billion as of March 2022, the United States has the greatest trade deficit with China, which is also one of its largest trading partners. In March 2022, exports to China totaled $12.9 billion, while imports totaled $61.5 billion.