The U.S. trade deficit in goods and services rose to a record high in August, largely on the back of a rise in imports as businesses continued to build up inventories in response to strong consumer demand.
The Commerce Department said in an Oct. 5 statement (pdf) that the trade deficit—the difference between exports and imports of goods and services—rose by 4.2 percent in August, hitting an all-time high of $73.3 billion.
Imports rose 1.4 percent to $287 billion, while exports edged up 0.5 percent to $213.7 billion.
Consumer goods imports saw a relatively sharp rise of $2.7 billion in August, led by pharmaceutical preparations, industrial supplies and materials, organic chemicals, toys, games, and sporting goods.
Nicole Wolter, President and CEO of HM Manufacturing, which makes parts for power transmission and precision mechanical components, told NTD in an interview that robust demand has left many companies scrambling to fill orders amid shortages of materials and labor.
“It’s rough. If it’s not workforce, it’s material. And if it’s not material, it’s your sub-components. And it just keeps trickling down,” she said, adding that her firm has been forced to pass on some costs to customers.
Wolter said the supply crunch has exposed the vulnerability of globalized just-in-time supply chains.
“We’ve had to actually machine components that we don’t normally do, just to get our customers out of a bind. It’s crazy,” she said, adding that she would like to see more reshoring of supply chain components to alleviate what she called a “very vicious cycle.”
The Commerce Department report also showed that the politically sensitive goods deficit with China—the largest the United States runs with any country—rose by $3.1 billion in August to $28.1 billion.
Former President Donald Trump was deeply critical of the U.S.–China trade deficit, which he sought to whittle down by negotiating a deal built around a pledge by Beijing to buy $200 billion more in U.S. goods and services over 2020 and 2021.
According to the Peterson Institute for International Economics (PIIE), a nonpartisan research organization that tracks the status of China’s purchases from the United States relative to its commitments, Beijing is well behind on this pledge.
For 2020, China’s total import shortfall was $73.2 billion, or 58 percent of the target, according to PIIE, while through August 2021, Beijing was on track to end the year more than 30 percent short of its buying commitment.
U.S. trade representative Katherine Tai, the Biden administration’s top trade negotiator, said Monday that the United States plans to launch new trade talks with China, while maintaining Trump-era tariffs and pushing Beijing to fulfill the import pledges.
Tai also vowed to press the Chinese regime for “frank” talks in a bid to end Beijing’s unfair trade practices, speaking of the need to take “all steps necessary to protect ourselves against the waves of damage inflicted over the years through unfair competition.”
She also said Washington would start a “targeted tariff exclusion process” to exempt some Chinese imports from punitive U.S. tariffs, with potential additional exclusion processes in the future.