Former Associate Manager, International Policy, U.S. Chamber of Commerce
February 22, 2022
2021 was a year of records for trade in America, according to official statistics released earlier this month by the U.S. Department of Commerce. Both exports and imports recorded their highest year-over-year growth rates ever as they bounced back from a pandemic-related drop the previous year.
This trade momentum is also due in part to unprecedented U.S. fiscal and monetary policy actions, including direct support to households and businesses and negative real interest rates. As a result of those actions, American households and businesses entered 2021 with money to spend, and they spent a big chunk of it on tradable goods.
In turn, many global industries scaled up production to meet U.S. demand, to the point that the trade surge overwhelmed some port facilities and generated other supply chain difficulties. However, some sectors, particularly in services, continued to struggle as the pandemic persisted.
Inflation also reached its highest level in decades, and these price increases pumped up the trade figures as well. Prices for imported goods increased 10.4% in 2021, and export prices rose 14.7%, characterized by the Bureau of Labor Statistics as “the largest calendar-year increase since the series was first published in 1984.” The U.S. Department of Commerce’s trade figures are not adjusted for inflation.
Even so, global trade sets new records in many respects. Consider:
Record exports and imports. In 2021, exports of goods and services hit $2,528.5 billion, up $394.1 billion after decreasing nearly $400 billion in 2020. Imports increased $576.5 billion to $3,387.7 billion. For goods alone, exports reached a record $1,762.0 billion, up $333.2 billion, and imports hit a record $2,852.6 billion, up $501.8 billion. Services trade experienced more modest gains, with exports and imports increasing $60.9 billion and $74.7 billion respectively.
Export growth rebounds. U.S. exports of goods and services rose over 18.5% in 2021, largely making up for the pandemic-induced 15.6% decrease in 2020. Goods exports increased by 23.3%. International Trade Administration economists note the U.S. set export records with 57 trading partners, including big markets such as Mexico, China, South Korea, and Germany. While this export boom is expected to taper off somewhat, officials will need to be on guard against new trade barriers that could reverse these gains – as they did in 2019 when new tariffs and foreign retaliation led U.S. exports to decline despite strong economic growth broadly.
FTAs make big markets. Goods exports to America’s 20 free-trade agreement (FTA) partners continue to make up nearly half (more than 46.7% in 2021) of all U.S. goods exports. Exports to the group increased 30% year-over-year. Additionally, trade with those 20 countries made up 50.9% of the total U.S. export increase in 2021. This is a remarkable performance given that these countries represent approximately 6% of the world’s population outside the U.S.
Deficit rises. While the trade balance is a poor measure of good trade policy, the U.S. trade deficit also rose. In large part, this is a reflection of the strongest U.S. economic growth since 1984 (5.7%), and the fact that U.S. growth outpaced that of its chief trading partners led import growth to outpace export growth. The combined goods and services deficit in 2021 was $859.1 billion, up from $676.7 billion in 2020 and higher than the $763.5 billion record set in 2006. The goods and services deficit as a percentage of GDP hit 3.7% in 2021, below the levels reached in the 2000s. The smaller services surplus contributed to the overall increase in the trade balance.
Services trade recovering. Services exports increased $60.9 billion to $766.6 billion after dropping $170.7 billion in 2020. Financial and other business services were the top two services export categories in 2021 and grew almost $17.7 billion and $26.8 billion, respectively, after being minimally affected by the pandemic. The strength of these sectors alone demonstrates the competitiveness of the U.S. services sector.
U.S. energy production continues its boom. Crude oil exports in 2021 reached $69.3 billion, surpassing 2019 as the highest export total of any year. Petroleum exports reached a record $196.1 billion in 2021 after suffering a pandemic-related drop in 2020. After hitting its first surplus in years in 2020 due in part to a pandemic-related drop in energy imports, the energy balance recorded a deficit in 2021. However, this has most likely already shifted back to surplus: In January 2022, “for the first time ever, U.S. exports of liquefied natural gas to Europe exceeded Russia’s pipeline deliveries,” as energy analyst Daniel Yergin recently wrote. The U.S. evolution from being the world’s top energy importer to a significant exporter is having a huge impact on the U.S. balance of trade and global energy markets.
Americas first. Canada was the top market for U.S. goods exports again in 2021, with exports reaching $307.6 billion. Mexico took the second spot with a U.S. export total of $276.5 billion. The Americas region was the destination of 43.1% of U.S. exports. That’s significantly more than the shares held by many Asia-Pacific economies (28.0%) and all of Europe (21.9%). The nations of the Americas accounted for about half of all the increase in U.S. merchandise exports in 2021, again demonstrating the value of the region’s network of FTAs.
Transatlantic ties still bind. As a single market, the EU remains America’s top trading partner (combining exports and imports) when services are included. Goods exports increased 17.5% in 2021, nearly making up for the drop in 2020 and making it America’s third largest export market (behind Canada and Mexico). The UK, which formally left the EU in January 2020, was edged out in 2021 by Germany as the largest U.S. goods export destination in the region. Though full services data is not yet available for 2021, services trade plays an outsized role in transatlantic trade. The U.S. is expected to once again run a services surplus with the EU and an overall trade surplus with the UK.
U.S.-China trade rolls on… China remains the top source of U.S. goods imports, increasing by $71.6 billion to reach $506.4 billion in 2021. However, its lead over other markets began to shrink after the U.S. applied tariffs on most Chinese goods, which led to a drop in goods imports from China of $87.9 billion in 2019 and another mostly pandemic-related drop of $17.7 billion in 2020. On the other hand, U.S. exports to China increased 40% from 2019 to 2021. The goods deficit with China increased to $355.3 billion but remains well below the record deficit of $418 billion in 2018.
…While other U.S.-Asia trade strengthens. Many U.S. export records were set with Asian markets. U.S. exports to India increased a colossal 48.2% from 2020 to 2021, reaching $40.1 billion. The U.S. hit export records with several members of the Association of Southeast Asian Nations (ASEAN), and exports to the ASEAN region as a whole increased roughly 23.2% to $94.1 billion. Exports to Taiwan increased 19.6% to $36.9 billion, again setting another U.S. export record.