According to the Wall Street Journal, the U.S.’s trade deficit with China reached an all-time high of $859.1 billion last year.
The U.S. Commerce Department reported that the trade deficit in goods and services in 2021 outstripped the previous high of $763.53 billion set in 2006. Yearly trade balance data, which is not adjusted for inflation, dates back to 1960.
China continues to be the largest single source of trade deficits in the U.S., accounting for $355.3 billion, or 41%, of the entire deficit in 2021.
In 2020 and 2021, imports from Asian countries grew dramatically during the pandemic, but they were still about 5% lower than China’s rates in 2018 and 2019.
In general, while it raised concerns that the U.S. may still be reliant on other nations for its supplies, economists are more positive. According to Voice of America, the figures reflect that the economy is in good shape, and there is a net flow of investment into the U.S.
Joseph Francois, executive director and economist at the World Trade Institute at the University of Bern in Switzerland, said, “Whenever the U.S. economy is doing well, the deficit will worsen.”
Francois explained, “There’s more investment coming in because people want to put more money in when the U.S. economy is better. The result is that the trade deficit looks worse, especially for commodities. So in a sense, when the economy is doing well, as it is now—creating a lot of jobs, recovering from the Covid-19 pandemic—You’re going to see an increase in the deficit relative to our previous baseline.”
Meanwhile, despite the increased deficit, China continues to be a source of trade friction.
China has yet to deliver on its promises to the Trump administration’s January 2020 “Phase I trade agreement,” under which Beijing is committed to raising imports from the U.S. by $200 billion beyond pre-2020 levels.
The Peterson Institute for International Economics (PIIE) report on Feb. 8 stated that the second world economy has not simply fallen short of its responsibility.
The paper reads, “In the end, China bought only 57% of the U.S. exports it had committed to purchase under the agreement, not even enough to reach its import levels from before the trade war. Put differently; China bought none of the additional $200 billion of exports Trump’s deal had promised.”
According to the report, based on trade data through November, China was 17% short of its agriculture goal, 41% short of its manufacturing goal, and 62% short of its energy goal, far beyond the ability of last-minute deals to fill the gap in the window specified by the agreement.