The U.S. Department of Commerce recently revealed that the U.S. trade deficit rose to its highest level in more than two years in December. The trade gap increased 24.7 percent to $98.4 billion, the highest since March 2022, from a revised $78.9 billion in November, the Commerce Department’s Bureau of Economic Analysis said.
It was also the second-largest deficit on record and the monthly increase was biggest since March 2015.
Imports rise to all-time high of $364.9 billion
Imports increased 3.5 percent to an all-time high of $364.9 billion in December. According to the data, the value of imports increased due to an increase in imports of supplies and industrial raw materials, including finished metal works. The trade report also revealed that capital goods imports increased by $1.3 billion, lifted by computers as well as computer accessories. Howver, imports of civilian aircraft fell as did those of automotive vehicles, parts and engines.
Consumer goods increased $2.2 billion, driven by toys, games and sporting goods, cell phones and other household goods.
Exports fall 2.6 percent
At the same time, exports fell 2.6 percent to $266.5 billion. Goods exports fell 4.2 percent to $170.2 billion, the most since May 2020. They were pulled down by a $1.8 billion decline in consumer goods.
In addition, exports of industrial supplies and materials, which include petroleum, declined $1.8 billion. Capital goods exports also declined $1.4 billion while automotive vehicles, parts and engines fell $0.9 billion.
The U.S. goods trade deficit jumped 18.2 percent to a record $123.0 billion. Adjusted for inflation, the goods deficit widened 15.4 percent to $111.9 billion.
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U.S. trade deficit with Canada rises
The report revealed that the U.S. experienced significant trade deficits with several trade partners, including China, Mexico and Canada, which have been targeted by President Donald Trump’s administration for broad or additional tariffs. On Monday, Trump suspended a 25 percent tariff on Mexican and Canadian goods until next month.
An additional 10 percent tariff on goods from China went into effect on Tuesday.
The U.S. trade deficit with Canada increased $2.9 billion to $7.9 billion in December. Meanwhile, the goods trade gap with China narrowed in December, it increased to $295.4 billion in 2024 from $279.1 billion in 2023. In addition, the deficit with Mexico contracted to $15.2 billion from $15.4 billion in November.
Services imports increased $1.0 billion to a record $71.8 billion, while exports rose $0.4 billion to an all-time high of $96.3 billion.
The new administration attributed the addition of the new tariffs to controlling illegal immigration and the movement of illicit drugs. However, the surge in the latest deficit could strengthen its argument for a protectionist trade policy.
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