2020 was, by far, the worst year on record in terms of America’s trade deficit. To be sure, the COVID-19 pandemic was a big factor as imports of medical equipment and supplies exploded and COVID stimulus checks, intended to stimulate the U.S. economy, instead were used to purchase a flood of imported goods. Meanwhile, American exports felt the sting of a global economic slowdown. As a result, the goods trade deficit in 2020 was $915.6 billion, all of which – and a little more – was due to the deficit in manufactured goods, which tallied $919 billion. It’s not a stretch to suggest that America’s trade policy was actually a bigger drag on the American economy in 2020 than was the COVID-19 pandemic. Yet, the pandemic got all of the attention while the media, as usual, barely took notice of the trade deficit.
If January is any indication, don’t look to 2021 for any signs of hope. The report released by the Commerce Department on Friday revealed an overall trade deficit of $68.2 billion in January, the 2nd worst month on record and just $0.8 billion shy of the record set only two months earlier. The deficit in manufactured goods was worse – $86.5 billion, the 3rd worst month on record and just $0.7 billion shy of the record set the previous month. Annualized, the deficit in manufactured goods tops $1 trillion per year.
The only bright spot in the report is China, thanks to the 25% tariffs imposed by the Trump administration on half of all of its goods. The trade deficit with China came in at $310.8 billion in 2020 – bad, but a big improvement over the record of $419 billion set in 2018. In January of this year, the deficit with China was $26.25 billion – an annualized rate of $315 billion.
But even the news on China isn’t all good. I’ll cover how China did relative to the “Phase 1” trade agreement it signed with the U.S. in January, 2020 in my next post.
And there’s more bad news to be found in the January report that I’ll also cover in a subsequent post.