US trade deficit hits highest on record as imports soar

A surge in imports of goods and services in March drove the US trade gap to the highest level ever recorded, with huge increases in purchases of autos, computers, furniture and clothing, the government reported Wednesday.

The trade deficit jumped more than 22 per cent to $109.8 billion, as the double-digit increase in imports to an all-time high of $351.5 billion outstripped the more modest gain in exports, the Commerce Department said.

But US exports also hit a record of $241.7 billion, the data showed.

Also Read | Services exports set a new record of $254.4 billion in 2021-22

As the world's largest economy showed a robust recovery from the pandemic disruptions in recent months, businesses have been hampered by global supply chain snarls and shortages that meant relatively modest import gains.

But the data showed a shift in March with a $3.2 billion increase in imports of autos, parts and engines — including a $2.5 jump in passenger cars alone — a $1.5 billion rise in computers, and $1.3 billion gain for computer accessories.

Purchases of furniture and household goods jumped $1.3 billion, while toys, games and sporting goods rose by a similar amount, the report said.

Also Read | Is the US Federal Reserve's economic help withdrawal too late?

A strong American consumer is likely to support continued demand for imports, while slower recoveries among US trading partners could hold down export growth, economists say.

"The prevailing domestic and overseas economic environment could keep the deficit pinned near record levels and impose a significant headwind to US GDP growth," said Mahir Rasheed of Oxford Economics.

The Federal Reserve is raising interest rates as it grapples with accelerating inflation, which could tamp down demand.

In the first three months of the year, the goods and services deficit increased $84.8 billion, or 41.5 percent, from the same period in 2021, the report said.

"However, we expect aggressive policy tightening (and) somewhat softer domestic demand growth to cool import growth and allow the deficit to stabilize," Rasheed said.

Even with the ongoing Covid-19 lockdowns in China, which raised fears of increasing difficulties sourcing products, the trade gap with the world's number two economy jumped $7.4 billion to $48.6 billion, the report said.

The deficits with Vietnam and Taiwan were the highest ever, according to the data.