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US Trade Deficit Narrowed Last Year By Most in 14 Years
February 7, 2024
The U.S. trade deficit grew slightly in December, but over the course of the year contracted by the most in 14 years as imports declined and exports jumped to a record high.
The trade deficit, the gulf between imports and exports of both goods and services, widened slightly in December from the month before, but an a full-year basis, it shrank by nearly 19% to $773.4 billion, according to data from the Commerce Department. That is down significantly from a record high in 2022 and marks the first annual contraction in four years. The Commerce Department figures are not adjusted for inflation.
Exports increased 1.2% to a record $3 trillion last year, propelled by capital goods, automotive vehicles, parts and engines as well as consumer and other goods.Exports were also boosted by the U.S.’s status as an increasingly major oil producer. In December, the inflation-adjust value of petroleum exports surged 15.9% to a record high.
The narrowing trade deficit reflects efforts from companies to limit the buildup of inventories, as well as changing consumer preferences, which have continued to shift toward services and expereinces after the padnemic era when goods were more on demand.
This reduced demand for imported goods helped narrow the trade gap with China. The nation’s merchendise deficit shrank 27% to $279 billion, the lowest since 2010. The magnitude of the narrowing was the largest on record in data that goes back to 2002.
At the same time, the trade gap with Mexico grew to a record of $152.4 billion, a sign that in the post-pandeimc, less globalized world, the U.S. is likely to rely less on overseas manufacturers like China and more on closer-to-home nations like Mexico.
