As expected, the goods and services deficit hit a record $74.4 billion in March, up $3.9 billion from $70.5 billion in February. It was of course led by the goods deficit, which was $90.6 billion on a Census basis, up $86.9 billion in March, the U.S. Bureau of Economic Analysis reported on Tuesday.
Exports of goods increased $11.7 billion to $142.9 billion in March, led by industrial equipment and capital goods, both on the upswing. Imports of goods increased $ 15.3 billion to $234.4 billion in March, led by consumer goods. But just as interesting from that data is the fact that capital goods imports rose by $3.3 billion, with semiconductor imports rising by $1.3 billion. On the flip side, our exports of capital goods and semiconductors are not rising as quickly, perhaps because most of that demand is fulfilled at home as the economy heats up and the pandemic cools down.
Most of the import demand is in consumer goods, rising by $4.5 billion.
As a side note on the current import surge, the Port of L.A. processed 957,599 containers, a 113% jump compared to 449,568 at the onset of the pandemic in March 2020 and a 47% increase compared to 650,977 containers handled in March 2019. Imports reached 490,115 containers last month, an increase of 123% compared to the previous year. Exports remained about flat at 122,899 containers while empty containers waiting to be shipped back to China rose 219% compared to March 2020.
As a result, the year-to-date deficit in goods is now $261.95 billion for the first three months of the year, up from $213.69 billion in 2019 when there was no pandemic in sight.
CPA chief economist Jeff Ferry said that the U.S. is on track to reach its first-ever trillion-dollar deficit in goods this year. “This record monthly goods and services trade deficit, along with just the goods deficit, all reflect the surging growth in durable goods purchases by U.S. consumers, the shortage of containers available for U.S. exports at our ports, and finally and most importantly, the lack of reshoring of U.S. industry thus far,” Ferry said. “American workers, farmers, and business people are hoping to see the Biden administration fulfill its build-back-better pledges as soon as possible.”
CPA thinks the U.S. is at a “now-or-never” fork in the road to rev up and support domestic supply chains or our post-pandemic recovery will end up being an Asian jobs program.
March’s Biggest Trade Gaps
The U.S. trade deficits for the month were led by China ($36.9 bln), European Union ($16.9 bln), Mexico ($8.4 bln), Germany ($5.5 bln), Japan ($5.1 bln), Canada ($3.1 bln), Italy ($2.9 bln), Taiwan ($2.6 bln), India ($2.2 bln), South Korea ($2.1 bln), and France ($1.5 bln)
- Our deficit with China increased $6.7 billion to $36.9 billion in March;
- Our Mexico deficit increased by $1.6 billion to $8.4 billion in March. Exports decreased $0.6 billion to $22.2 billion and imports increased $1 billion to $30.6 billion;
- The deficit with the European Union decreased $2.1 billion to $16.9 billion in March. Exports decreased $0.5 billion to $20.1 billion and imports decreased $2.6 billion to $37.0 billion.
What We’re Buying, What We’re Selling
For manufactured goods, our top five exports for the month of March are always the same. In terms of order of importance, March look identical to February. Only pharma exports are below February.
Despite the growing trade balance, many trade indicators have improved since February, all indicative of easing Covid pressures.
The values below for February are revised on a Census basis.
|1. Pharma||$5.56 billion||$5.22 billion|
|2. Industrial machines||$5.29 billion||$5.08 billion|
|3. Semiconductors||$5.24 billion||$4.83 billion|
|4. Passenger cars||$4.70 billion||$4.40 billion|
|5. Car parts||$4.21 billion||$3.93 billion|
Here are our top five goods imports for March. Cars and pharma have flipped places in the top 2.
|1. Passenger cars||$13.03 billion||$12.05 billion|
|2. Pharma||$12.93 billion||$13.60 billion|
|3. Car parts||$10.05 billion||$9.39 billion|
|4. Computers||$8.82 billion||$8.61 billion|
|5. Cell phones||$8.66 billion||$9.67 billion|
Despite the empty containers issue at ports that have been hurting global agriculture exports, on a value basis, corn exports are $2.12 billion versus $1.85 billion, while soy values are down to $1.55 billion versus $2.13 billion though this is because soy is out of season. Commodity prices are rising so this does not speak to volume shipments. Soy, corn and meat exports are up in percentage terms on a value basis.
Lastly, tiny Vietnam, now seen as an outpost for China manufacturers looking for cheaper labor and weaker regulations, has a $7.8 billion surplus with the U.S. That is our biggest trade deficit ever with Vietnam.
The closest southeast Asian country in which the U.S. has a growing deficit is Malaysia, at $4.2 billion for March. Like Vietnam, our deficit with Malaysia is also its biggest ever and should stand as a reminder of what the Transpacific Partnership trade agreement would have done had that been enacted.