US trade deficit in both goods and services rose to a record $859.1 billion in 2021 as imports surged, the US Commerce Department has reported.
US imports rose by 20.5 per cent to $3.39 trillion in 2021 while exports climbed by 18.5 per cent to $2.53 trillion, according to the department.
The trade gap represented 3.7 per cent of US gross domestic product in 2021, up from 3.2 per cent in 2020, Xinhua news agency reported.
“A surge in imports to fuel domestic demand for goods caused the trade deficit in goods and services to widen 27 per cent in 2021 and reach its largest annual deficit on record,” Tim Quinlan and Shannon Seery, Economists at Wells Fargo Securities, said on Tuesday in a note.
“As the economy faces its third year with the virus, we expect to see a further widening in the deficit in 2022. The need to replenish inventory in the US will keep imports strong even as domestic demand transitions back to services,” the Economists said, adding more volatile growth in exports will result in trade being a drag on US economic growth in each quarter of the year.
“Eventually as domestic demand begins to slow and the global recovery continues, we expect trade to become more of a neutral force on headline growth in 2023,” they said.
The US economy grew 5.7 per cent in 2021, partly due to the massive fiscal and monetary support, following a pandemic-induced contraction of 3.4 per cent in 2020, according to the department.
Analysts said rising inflation also played a role in the surge of US imports as American consumers paid higher prices. The US consumer price index rose 7 per cent in December 2021 as compared to same period in 2020, the largest 12-month increase since June 1982.