U.S. June Trade Deficit Widened to a Record as Economic Growth Boosted Imports

The U.S. trade deficit widened to a record in June as the resurgent American economy drove strong demand for foreign-made goods.
The foreign trade gap in goods and services expanded 6.7% from May to a seasonally adjusted $75.7 billion, the Commerce Department said Thursday. Imports climbed 2.1% to $283.4 billion, also a monthly record. Exports increased 0.6% to $207.7 billion.
Economists surveyed by the Wall Street Journal expected a deficit of $74.2 billion in June.
American consumers and businesses have stepped up spending and investment as the economy has recovered to its pre-Covid-19 size, fueling demand for imports. Exports have grown more slowly, reflecting weaker recoveries in some other regions that have made less progress against the coronavirus.
The International Monetary Fund last week said that varying progress in vaccinations had created a fault line between countries with improving and deteriorating economic prospects. It raised its growth forecasts for the U.S. and other advanced economies with relatively high vaccination rates against Covid-19, while lowering the outlook for emerging-market countries where vaccination rates have lagged behind, especially in Asia.
That dynamic helps widen the U.S. trade deficit, as the American economy continues to pull in more goods from abroad. Several rounds of government stimulus payments have also left Americans with plenty of cash to spend, while weakened trade partners limit purchases of U.S. goods and services.
The trade report for June covered a period before the Delta variant began its spread in the U.S. By the end of June, Covid-19 cases were still very low in the U.S.
Another challenge for the trade recovery: Although U.S. demand has been strong, global manufacturers have faced widespread problems fulfilling orders across their supply chains. The pandemic, factory closures and abrupt changes in shopping patterns have led to lingering shortages of crucial items, leading to manufacturing delays.
A severe shortage of semiconductors, for example, has slowed production of everything from computers to home appliances to automobiles. Many companies have found themselves squeezed between the surging consumer demand on one side and their supply-chain shortages on the other.
Subaru Corp. Chief Financial Officer Katsuyuki Mizuma said U.S. dealers are desperately trying to order more imported vehicles to relieve a shortage of inventory. Nearly all major auto makers like Subaru have had their production slowed by the global chip shortage.
“As soon as the ship reaches the shore, they sell right away,” he said.
If those supply chains prove difficult to fix, it could threaten the trade outlook in coming months, as could new variants of the virus causing unexpected disruptions, said Mahir Rasheed, a U.S. economist at the forecasting firm Oxford Economics.
As the U.S. economy continues reopening, consumers could also turn away from buying so many imported goods — such as the computer gear they used for remote work — and once again spend more freely on restaurant meals, travel and other services. That would also narrow the trade deficit, economists said.

Leave Comment

Your email address will not be published. Required fields are marked *