The numbers: The United States’ trade deficit with other countries rose nearly 5% in February to a record $ 71.1 billion, as a rapidly recovering economy allowed Americans to buy more imported goods and services. The trade gap widened from a revised $ 67.8 billion in January, the government said Wednesday. Economists polled by Dow Jones and The Wall Street Journal had predicted that the deficit would total $ 70.5 billion.
The previous record deficit on record occurred last November, when it topped $ 69 billion. While higher deficits may point to a less productive economy, that is not the case at this time. The United States has recovered faster than most other countries, and Washington provided massive financial stimulus, allowing Americans to spend more than citizens in Europe and elsewhere. Last Friday, the government said the United States gained 916,000 new jobs in March in another clear sign that the economy is strengthening. The result: Americans are buying imported goods, but purchases of American goods abroad have lagged far behind. What happened: Imports fell 0.7% to $ 258.3 billion in February, but remained at the cusp of a record. The United States imported more industrial and oil supplies, while shipments of automobiles and consumer goods fell. The level of imports is now almost 5% above the levels of the previous year. Purchases of imported goods could be even higher if it weren’t for a traffic jam at US ports, where many foreign goods are on the high seas as dockworkers rush to unload a fleet of waiting vessels. The shock is causing the prices of many products to rise and, in some cases, is causing significant shortages. Exports fell a further 2.6% to $ 187 billion and have yet to return to pre-crisis levels. Exports totaled $ 208 billion in February last year. In February, the US exported fewer planes, computer chips, cars and food. The goods trade deficit with China increased $ 3.1 billion to $ 30.3 billion. Although the trade dispute with China has faded from the headlines after President Trump‘s departure, the Biden administration has maintained stiff US tariffs on Chinese goods and does not appear ready to ease them anytime soon. Read: Inflation is back in Wall Street’s crosshairs as the economy recovers. The Big Picture: The US trade deficit is almost certain to remain at or near record highs in the near term. Once the economies of other countries catch up with those of the US, they are likely to start buying more US goods and narrow the trade gap. A large trade deficit subtracts from gross domestic product, the official scorecard for the US economy. However, a flood of federal spending and a revitalized private sector are dwarfing the negative impact of record deficits. Economists predict the US will grow 6% or more in 2021. Read: US manufacturers grow faster as key ISM index hits 38-year high Market reaction: Dow Jones Industrial Average DJIA, -0.29 % and S&P 500 SPX, -0.10% were set to open lower in trading on Wednesday.