WASHINGTON — The overall U.S. trade deficit rose 12.2 percent last year, nearing $1 trillion as Americans purchased large volumes of foreign machinery, medicines, industrial supplies and car parts, according to data released Tuesday by the Commerce Department.
The goods and services deficit reached $948.1 billion, its largest total on record, after rising $103 billion from the previous year.
The data showed evidence of the U.S. economy’s continuing recovery from the pandemic, which had held down spending on services like travel and entertainment and pushed up purchases of imported goods. Rapid inflation and higher energy prices were responsible for some of the growth, because the trade data is not adjusted for inflation.
The numbers also showed signs that global supply chains appear to be reshuffling somewhat, as the U.S. government erects more barriers to trade with China and businesses seek to diversify where they get materials and goods. The Biden administration has identified the nation’s reliance on China for materials like solar panels and electric vehicle batteries as a security risk, and introduced incentives and penalties to try to persuade companies to change supply chains that proved vulnerable to pandemic disruptions.
The U.S. trade deficit in goods with Mexico, Canada, India, South Korea, Vietnam and Taiwan all grew strongly last year as manufacturers sought new sources of foreign products.
What is inflation? Inflation is a loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation and toys.
Still, many companies have so far proved unwilling or unable to cut ties with China, which continues to house the world’s largest concentration of factories. Despite rising tensions between the world’s biggest economies — which were further strained last week by the discovery of a Chinese spy balloon flying over the United States — trade between the countries remains strong.
Overall trade with China last year easily surpassed previous records, and the U.S. trade deficit with China grew 8.3 percent annually to $382.9 billion, the second-highest total on record.
There was also little sign that the United States is retreating from trade with the world overall, even as geopolitical tensions with Russia and China rise.
Russia’s war with Ukraine has pushed up energy and food prices globally and stoked inflation, but it has also played a role in bolstering American trade. After cutting many economic ties with Russia, the European Union has turned to purchasing more energy products from the United States.
Partly as a result of shipments of crude oil, fuel oil and natural gas to Europe, total U.S. exports grew more quickly than imports last year. A recovery in the U.S. travel and transportation sector after the pandemic also pushed up exports of American services.
The overall volume of U.S. imports remained much larger than exports, however, resulting in a trade deficit. Exports of goods and services rose 17.7 percent to $3 trillion, while imports rose 16.3 percent to $4 trillion. The strong value of the U.S. dollar also made foreign goods cheaper than American ones, driving up the trade deficit.
In December, U.S. exports fell slightly from the previous month to $250.2 billion, as the global economy slowed and the United States sent fewer industrial materials and consumer goods abroad. Imports edged up to $317.6 billion.
Economists and politicians have varying views about how much the trade deficit matters for the health of the U.S. economy. Some economists point out that the trade deficit tends to grow when the U.S. economy does and Americans are more able to buy the goods and services they want from abroad. But many also worry that sustained trade deficits can result in lower employment and economic growth in the United States.
The record deficit showed that “we still have a long way to go to reshore supply chains and bring production back to America,” said Scott Paul, the president of the Alliance for American Manufacturing, a domestic trade group. “We’ve seen significant policy shifts that favor U.S. manufacturing over the past couple of years, and we must continue to build on those.”
Former President Donald J. Trump routinely blasted the trade deficit a sign of economic weakness and called for narrowing the gap. President Biden has made few remarks about the trade gap specifically, but his administration is pushing to bring more manufacturing back to the United States and allied countries.
The United States has been bringing in a smaller share of its imported goods from China in recent years, in part because of Trump-era tariffs and other restrictions on trade.
One beneficiary of the shift has been Mexico, now a destination for more global factories hoping to serve the United States. Data released Tuesday showed strong growth in trade with Mexico last year, with exports rising 17.3 percent and imports 18.3 percent. The U.S. trade deficit with Mexico grew 20.7 percent to $130 billion.
When economists calculate the gross domestic product, a measure of America’s economic activity, they add exports to the national figures for government and private investment and spending, and subtract imports to estimate the value of the goods and services that are produced in the United States.
Based on that calculation, international trade was a significant source of economic growth for the United States last year, said Mark Zandi, the chief economist of Moody’s Analytics. Overall, Americans shifted from buying a larger proportion of imported goods during pandemic lockdowns to spending more on services, like dining, entertainment and travel, which are less likely to be imported.
“This was a big swing from 2020 and 2021, when trade was a major drag on growth and the deficit ballooned out,” Mr. Zandi said, adding that “a weak global economy will be a headwind to U.S. exports and further improvement in the trade deficit this year.”