By CHEYENNE LIGON
The U.S. international trade deficit widened slightly in January as American demand for imports outpaced the recovery of U.S. exports.
The trade deficit climbed to $68.2 billion in January, up from $67 billion last December, according to the monthly U.S. international trade in goods and services report released Friday by the United States Census Bureau. Imports of goods and services for January were $260.2 billion, up 1.2 percent–$3.1 billion–from December 2020. Exports of goods and services in January rose at a slightly more modest pace of 1 percent, up $1.8 billion for a total of $191.9 billion.
“We’re getting a recovery in the U.S.,” said Stan Shipley, senior managing director and economist at Evercore ISI in New York. “As a consequence demand here is going to go up, and it’s going to pull a lot of imports into the country.”
Despite political rhetoric about the widening deficit, economists say the mild increase in January’s trade gap is actually indicative of a quicker rebound for the domestic economy than for the U.S.’s trade partners. As U.S. consumer spending picks up faster than international consumer spending, the volume of U.S. imports will naturally be larger than the volume of U.S. exports.
“The main reason why the deficit is widening is because retailers are very upbeat about the demand they’re going to see soon, and they’re trying to stockpile merchandise,” said Steven Stanley, chief economist at Amherst Pierpont Securities LLC in New York.
This suggests strong economic activity later in the year as the pandemic is brought under control. However, until the COVID-19 crisis recedes in key U.S. trading partners across Europe and Asia, exports will continue to lag.
“The rest of the world is recovering, but at a slower pace, so our exports are rebounding but not nearly as rapidly as our imports have,” said Dr. Scott J. Brown, chief economist at Raymond James & Associates in Florida. “As the rest of the world improves, exports should pick up,” Brown added.
As the pandemic recedes, international trade will undoubtedly continue to adjust. But the end of the COVID-19 pandemic isn’t the only change on the horizon. The Biden administration is still developing its approach to trade, but the 2021 international trade policy agenda released earlier in the week signals a shift in both tone and tactic for the White House’s trade policy. According to the agenda, the Biden administration plans to focus more closely on supply chain security, maintaining a tough stance on China, and prioritizing government support of domestic industry, manufacturing, and agriculture.
“It still remains to be seen how relations will evolve with our key trading partners,” said Stanley.
“One big change is there will be a lesser reliance on tariffs. All in all, that’s probably a good thing and will allow for improvements to trade.”