How the pandemic is reshaping the US trade outlook
The fiscal and monetary response to the pandemic will leave a lasting mark on the net trade position of the US. The trade deficit is at record levels and is expected to widen by $248bn in 2021, to 3.7% of GDP in 2021, driven by a flood of imported goods while the economic struggles of our trading partners has led to a dampening of demand for exports.
What you will learn:
- Our baseline sees imports growing 14% in 2021, and cooling to a 4.7% pace in 2022. Exports, meanwhile, will grow a softer 5.1% this year, but the pace of growth is expected to double to 10.1% next year.
- While goods imports and exports are well above pre-virus levels, the recovery in goods exports will lag. Factoring in a slower normalization of services trade, we expect both services imports and exports to heal fully by Q2 2022.
- Despite our expectation that trade will continue to normalize, risks to the outlook include Covid-impaired supply chains, potential consumer caution as the Delta variant surges, and still-elevated tensions between the US and China.
Big shifts are underway in Russia-China trade
Data for Q3 on the volume of China's imports of crude from Russia show a drop against the June level. Rather than an indication that China's demand has peaked, this may be a sign that China is preparing for the Russian oil price cap recently agreed by G7 by shifting some of its purchases to the grey market.Find Out More
Levelling up is unlikely under the Liz Truss government
The government's levelling up ambition has probably been made more, not less, difficult by the new "Plan for Growth". Policies of lower taxes, less regulation, and a smaller state are unlikely to have much beneficial impact on long-term growth at the national level, let alone in those regions with long track records of underperformance.Find Out More