The direct stimulus payments that hit bank accounts across the U.S. in March increased incomes by a record amount—but much of it found its way into foreign coffers, pushing the trade deficit up to the highest level on record.
The U.S. international trade deficit rose to a record $74.4 billion in March with more imports on the books than exports, the Commerce Department said in a report Tuesday.
Exports of goods and services through international trade for the month rose 6.6 percent to $200 billion compared to imports of goods and services (up 6.3 percent to $274.5 billion), the report said.
The reasons so much of the stimulus leaked out of the U.S. economy are straightforward. U.S. production was expanding but still restrained by pandemic restrictions in March and low tariff barriers mean that increases in consumer spending typically translate into higher imports. It’s likely that other countries where domestic demand is depressed by the pandemic are off-loading goods and services to the U.S.
PNC Senior Economist Bill Adams says demand for foreign-made goods was aided by $1,400 stimulus payments given out last month for pandemic relief.
“Stimulus has kept American consumers spending through the pandemic, but restrictions on high-contact industries have diverted consumer spending from domestically-produced services to goods, much of which are imported,” Adams wrote in Greater Fort Wayne Business Weekly. “As the pandemic comes under control in the United States, American consumers will spend less on imported goods, shrinking imports; and foreigners will buy more U.S. exports as their economies recover further.”
The record deficit — the difference between what the United States buys from overseas and what it sells to other nations — represents a 58 percent increase from the same period a year ago and marks the highest deficit since the data series began in January 1992.
In March, imports increased most ($4.5 billion) in consumer goods, including textile apparel, furniture, household goods, toys, games, sporting goods and cellphones.
The March deficit was up about $4 billion from February and occurred amid widening gaps with China ($36.9 billion) and Mexico ($8.4 billion). The deficit with the European Union decreased more than $2 billion.
The United States recorded a $681 billion deficit for all of 2020, the largest yearly gap since 2008, largely because the near-economic collapse around the world due to the pandemic and restrictions severely depressed demand for U.S. goods and services.
—UPI contributed to this report.