U.S. Annual Trade Gap Grows to Biggest Since Financial Crisis

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The U.S. last year posted its biggest annual trade deficit since 2008 as the global health crisis depressed export markets for American companies.

The gap in trade of goods and services widened to $678.7 billion in 2020 from $576.9 billion in 2019, according to Commerce Department data released Friday. The December deficit narrowed 3.5% from the prior month to $66.6 billion, but is wider than the $65.7 billion median estimate of economists.

The pandemic played a pivotal role in spoiling Donald Trump’s four-year push to rebalance the deficit, with Covid-19 crimping demand and upending supply chains. The former president slapped hundreds of billions of dollars of tariffs on the European Union and on China, sparking a trade war that hurt U.S. manufacturing and agriculture even as it protected some slices of industry like steelmakers.

China regained the top spot among U.S. trade partners for goods after finishing behind Mexico and Canada in 2019. The Asian nation and the U.S. a year ago signed the first phase of a trade agreement that’s supposed to see China buying an extra $200 billion of American goods in two years, the result of nearly three years of contentious talks that roiled markets.

What Bloomberg’s Economists Say...

A cease-fire phase-one trade agreement in January 2020 included significant purchase targets for U.S. exports in exchange for no imposition of new tariffs. Though Chinese purchases have undershot goals, U.S. exports did perform better than imports in 2020. As the U.S. economy posted strong recovery in the second half, imports from China bounced, echoing old patterns. Yet a full return to the old normal is unlikely as political tensions remain and supply chains diversify, including some re-shoring of production in the U.S.

-- Andrew Husby, economist

For the full year, exports plunged 16%, the most in six decades of data, to $2.13 trillion, the least since 2010. The decline was propelled by a 61% drop in travel, which represents visitors to the U.S., to $76.1 billion. Transport exports retreated by more than one-third to $56.4 billion.

Imports declined 9.5% to $2.81 trillion, the smallest value in four years.

The merchandise-trade deficit for 2020 swelled to $915.8 billion, the most since records started in 1961, while the nation’s surplus in services fell 18% to $237.1 billion, the smallest since 2012.

Overall, the value of U.S. exports plus imports in December rose to $446.5 billion, the highest since February, but still down from $469 billion at the end of 2019.

As a share of the economy, the overall trade gap widened to 3.2% of gross domestic product from 2.7% at the end of 2019. While that’s the biggest year-end shortfall since 2011, it’s still significantly smaller than in the decade before the last recession, when it approached 6%.

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