US merchandise trade crossed $1 trillion in 2021 for the first time, just one year after it topped $900 billion for the first time.
In fact, I speculate.
The US Census Bureau will not release annual data for another three weeks.
But the total as of November was $980 billion, the most recent data. From there, $1 trillion is a chip shot.
I bet the US sees a total of about $1.06 trillion, for or take a few billion dollars.
I expected this to happen last summer, actually.
As I wrote earlier, it will not be the story of China. This year’s total could be the third lowest in the past five years. There is a handful of countries, many but not all of them in Asia, with which the US will show a record deficit when annual figures are released.
This deficit also won’t be the only record aspect of US trade for 2021.
As I wrote in Thursday’s post, the US will also set a record for collected tariffs. Pause for a moment. I like to think, and I’m always optimistic, that this will leave a hole in any naysayers’ belief that tariffs can tame the trade deficit.
Imports will also set a record. How can I be so sure?
Well, the record set in 2018 was $2.54 trillion. As of November of this year, the total was $2.57 trillion. As was the case with collected tariffs, the record was broken in 11 months. Expect imports to reach about $2.8 trillion.
And you still wonder why all these ships are floating in the Pacific Ocean, trying to squeeze into the Port of Los Angeles or the Port of Long Beach? Well, we buy a lot of things. At a time when Covid is preventing people from working throughout the supply chain.
Indeed, the deficit will almost certainly be higher but for those stranded ships.
Exports should also break a record, although I keep my wallet locked in my back pocket in this one, just in case. As you can see, imports are up 12.3% compared to the pre-pandemic period in 2019 while exports are up only 5.56%. I think exports will end up at about $1.7 trillion, which is the best 2018 total of $1.66 trillion.
Of course, this means that total trade will set a record, exceeding $4 trillion for the fourth time in the past three years.
In terms of the $1 trillion merchandise trade deficit, it’s a very noticeable increase, considering that the total only crossed $900 billion for the first time last year.
What should be most worrisome to anyone who focuses on trade imbalances is the actual imbalance.
What about the relationship between exports and imports? Exports divided by total trade versus exports minus imports.
It is more productive to picture our trade as a pie, a pie that keeps getting bigger. It is best displayed as a pie chart like a bar chart.
Even here, 2021 will be a special year. From 2008 to 2020, the ratio deviated from 40% of exports and 60% of imports only once – even as the trade deficit fluctuated. That was 2014. It was 41%.
It’s not just a significant number. It’s also a slow moving number.
In 2020, besieged by the epidemic, the number dropped to 38%. When 2021 data is released in early February, it will still be at 38%.