Goods Deficit Also Sets Monthly Record at $93.2 Billion
Department of Commerce figures published this morning show that in June the U.S. reported a trade deficit of $75.7 billion, a new record for U.S. and world history. The deficit was 6.7 percent higher than the May figure, and 49.4 percent worse than the year-ago June figure.
The goods deficit also set a new record for the U.S. and the world, at $93.2 billion, up 4.6 percent compared to May and 29.4 percent up on year-ago June. The skyrocketing trade deficit is driven primarily by consumers and industry making up for reduced purchases last year during the COVID pandemic by buying more and importing more this year. Total imports hit a new monthly record, at $283.4 billion, and goods imports set a record in that category at $239.1 billion.
In the first half of 2021, the U.S. had a trade deficit of $429 billion, suggesting we are on track for a record $800 billion trade deficit this year. On the goods side, our first half goods deficit of $538 billion suggests our full-year goods trade deficit could reach $1 trillion for the first time ever.
Those full-year figures would be larger than the GDP of most nations in the world.
In June, imports were driven by industrial materials, as consumer goods imports actually fell 2.5 percent from May. Industrial materials that saw substantial import growth in June included Iron and steel mill products, Organic chemicals, Plastics, Aluminum, and Lumber. On the consumer side, Cellphone imports were up 3.1 percent to $10.0 billion in the month, reflecting the increased use of stay-at-home technology in the pandemic.
Toys, games and sporting goods imports fell 2.1 percent in the month to $5.1 billion. However, on a year-to-date basis, the Toys, games and sporting goods category is up a stunning 82.3 percent over the first half of 2020. Year-to-date, Cellphone imports are up 31.6 percent in the first half of this year. Computer imports are up 24.9 percent, at $50.2 billion, in the first half of 2021. Automotive vehicles, parts and engine imports are up 37.2 percent to $177.5 billion for the first half of 2021.
Automotive exports in the first half of this year were just $72.2 billion, yielding an automotive deficit of $105.3 billion. That accounts for about a quarter of our total year-to-date trade deficit of $429 billion.
On a national basis, our deficit with China grew 5.7 percent to $27.8 billion. However it remains smaller than the year-ago figure of $28.3 billion, suggesting the combination of port congestion in Asian ports and Section 301 tariffs on Chinese imports is restraining those imports. The greatest growth in the deficit was in our trade with Europe, where the deficit grew 23.2 percent over May and 39.8 percent over the June 2020 level, to $28.1 billion in June 2021, reflecting the bounceback in European production after previous shutdowns and shortages linked to the COVID pandemic. Our deficits in Europe are led by Germany, at $5.7 billion in the month, and Ireland, at $5.0 billion.
With the U.S. economy growing this year at around 6.5 percent, faster than many other large nations, and a U.S. dollar exchange rate which is actually up about 2 percent after hitting a low in early June, all signs suggest that the U.S. is highly likely to set new annual records for its total trade deficit and its goods trade deficit. That will put increasing pressure on the Biden administration to deliver on its “Build Back Better” promises by boosting U.S. production to replace the flood of imports.