US Trade Deficit Reaches Record High

In March 2021, the U.S. trade deficit hit record highs. On the surface, it sounds like a major blow to an economy already hampered by COVID-19; but under the surface, the implications indicate an upside. The increase in spending indicates an economy on its way to recovering. While the trade deficit itself is something leaders need to address, early-stage plans are already in place to increase domestic spending on goods made at home. What remains to be seen is whether the current deficit is a peak, plateau, or another data point on a run-up.

A look at the deficit, by the numbers

2021 is off to a worrisome start for the trade deficit. In the first quarter, the United States saw an increase in the deficit of 64.2%, up from the same time period last year. In March alone, the U.S. deficit hit a high of $74.4 billion, showing an increase of 5.6% from February. This amounts to an increase of roughly 6.3% as imports grew from February to March.

With the domestic economy in full recovery mode, people are spending money again. Unfortunately for domestic producers, much of this spending is going toward imports. Thankfully, there’s also been a small yet noticeable uptick in American-made product purchasing.

A sign of America’s recovering economy?

The height of the coronavirus pandemic was a turbulent time for the economy, to say the least. Many Americans lost their jobs. Multitudes of small businesses and factories closed. Requests for unemployment hit an all-time high. Amidst it all, spending plummeted. Beyond a drop in unemployment claims and the reopening of businesses, the recent increase in spending is perhaps the strongest sign that the American economy is recovering.

Federal reports reveal an annual economic growth rate of 6.4% over the past quarter. This rate is only expected to grow over time thanks to the reopening of businesses across the country. Multiple industries have seen an increase in customers over the past few months, including restaurants, barbershops, and more. March also saw an increase of around 916,000 jobs, and the need for unemployment aid dropped significantly. The undercurrent to all this activity? Spending.

Biden’s “Buy American” initiative faces hurdles

While increased economic growth is a good thing, focus on lower-cost imports shows that Americans are still cautious with their spending post-pandemic. They’re opting for cheaper alternatives as they reestablish financial stability. Thankfully, there’s an opportunity for domestic producers to step in and capitalize on an increase in spending. It starts with federal guidance.

President Biden’s “Buy American” initiative seeks to kickstart federal spending on American-made products. While a great prospect for producers, the initiative faces challenges, including loopholes that allow American companies to produce products offshore and assemble them domestically. Government spending preferences have also not seen an update for over six decades. The government needs to overcome these and other challenges for Biden’s initiative to help push trade back into balance.

Where is the deficit headed?

While the current deficit data point spells worry for pundits, it’s just that: a data point. As supply chain woes continue to unravel and domestic production initiatives ramp up, there’s hope that buying American goods will come back into fashion over the next several years. The same headwinds causing the import-export balance could be the same ones to turn the tables as American companies rebuild supply chains, restart production, and recapture markets closer to home.

The best way to get ready for impending consumer demand is to make sure your equipment is up and running correctly. You can always count on the professionals at Global Electronic Services. Contact us for all your industrial electronic, servo motor, AC and DC motor, hydraulic, and pneumatic needs — and don’t forget to like and follow us on Facebook!
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