THE TRADE DEFICIT OF AMERICA TAKES A BIG LEAP IN 2022 – REACHING USD 1 TRILLION!

The trade deficit is a phenomenon wherein the country gets stuck into debt and is overburdened by excess imports and a shortage of funds. In simple terms, when any country imports more in value terms as compared to exports, then a situation arises which is called a trade deficit or trade imbalance. A negative trade balance impacts the reputation of the nation in a bad way. Investors and traders don’t prefer to invest in a nation whose track record of various past years shows a negative trade balance.

Every nation goes through this phase at some other time duration. The United States is also going through this phase for the past few years and in 2022, the trade deficit amount has hit a new record of USD 1 trillion.

CAUSES BEHIND THE RISE IN IMPORTS TO THE UNITED STATES

Before going to the causes, first, let’s understand the trend of the US Trade Deficit. So as per the US Trade Data for 2021-22, the trade deficit of the US went up by almost 12.5% from 2021 to 2022 making the total trade deficit equaling USD 1 trillion. the reason behind large-scale imports during this time period was the imports of machinery, industrial supplies, automobiles, automobile spare parts, etc. From 2021 to 2022, the trade deficit rose by almost USD 103 billion.

The main causes behind the rise in imports are as follows:

·        INADEQUATE SUPPLY: One of the main reasons behind the rise in imports to the United States can be the lack of supply as compared to demand. That means the demand for the above-mentioned goods in the nation is high and the supply is limited which is not adequate to fulfill the needs of all.

·        EXPENSIVE DOMESTIC LABOR AND RAW MATERIAL: Another reason behind largescale imports can be the unaffordable labor and raw material. That means the cost of procuring certain goods is very high in the United States due to which the nation prefers to import those from other nations.

·        WIDESPREAD VARIETY OF ITEMS: Another reason for this can be that the citizens of the country have a varied variety of choices and to make everything available, the US is forced to import commodities on a large scale. this will help the local manufacturers of the country to understand the needs and preferences of people and based on those assumptions, goods can be made domestically.

WHAT THE UNITED STATES IMPORTED THE MOST IN 2022?

Although, the United States imported numerous products from the world in the year 2022, but as per US Import Data the major items imported were:

·        Consumer goods and items (27% of total imports)

·        Capital goods like machinery, automobiles, etc. (26% of total imports)

·        Industrial supplies like raw materials (25% of total imports)

·        Vehicle spare parts (12% of total imports)

·        Eatable items like cereals, beverages, and feeds (6% of total imports)

In the US Import Data report, the major import partners of the United States were China, Mexico, Canada, Japan, and Germany.

SOME UNHEARD FACTS ABOUT THE US TRADE DATA

·        Due to the war that is going on between Russia and Ukraine for more than the past 1 year, the exports from the United States have started to rise because all the economic and trade ties with Russia are cut and as a result, all the EU nations are purchasing power sources and other goods from the US. A direct impact of this change has been seen in the US Export Data of last year.

·        A significant improvement has been observed in the travel and tourism industry of the US.

·        Many more benefits are being enjoyed by the US due to the ongoing war, but despite these benefits, the country has developed more trade deficit this year. if the exports of goods rose by USD 17.7% to USD 3 trillion, the imports also rose by 16.2% reaching USD 4 trillion which resulted in a trade deficit of approx. USD 1 trillion.

·        Moreover, the US Export Data showed a decline in December 2022 due to an economic slowdown due to which imports took a giant leap and went up by USD 317 billion.

 

CONCLUSION

In the end, we just want to state that in order to maintain a good reputation, the US should try to cover this trade deficit as soon as possible. The trade balance is one of those factors that are very crucial to judge the overall health of the country. If imports are more than exports for many years, then the country is not in a healthy state and vice versa.

There are conflicts of thought between the experts also. Some say that as the economy of the US grows, the trade deficit will also rise which is completely normal, whereas some say that a persistent trade deficit will lead to unemployment and slower economic growth.

POINT TO REMEMBER AND CONSIDER

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