US Trade Deficit Hits Record High... Household Debt Nears Pre-Financial Crisis Level

Last Year's Import Scale Increased by 20.5%... US Trade Deficit with China Rose by 15%
Household Debt Increased by $1.02 Trillion, the Largest Increase in 14 Years Since 2007

[Asia Economy Reporters Kim Hyunjung, Lee Hyunwoo] The United States recorded its largest-ever trade deficit last year, exceeding 1,000 trillion Korean won. This was due to the massive funds released into the market through the government's COVID-19 stimulus measures, which led to increased consumption of imported goods, along with a sharp rise in energy and raw material prices. Household debt also increased at the largest rate since just before the financial crisis in 2007, adding pressure to the US economic recovery.

On the 8th (local time), the US Department of Commerce announced that the annual trade deficit in goods and services for the US last year reached $859.1 billion (approximately 1,029.6 trillion Korean won), marking a record high. This figure represents a 26.9% surge compared to the previous year, attributed to a significant increase in import volume.

Last year, US imports rose 20.5% year-on-year to $3.39 trillion, setting a new record. Exports also increased by 18.5% to $2.53 trillion, reaching an all-time high, but the growth rate was smaller compared to imports. CNBC evaluated that "more than $6 trillion in massive funds were injected into the market through COVID-19 stimulus packages, but due to quarantine policies limiting dining out, travel, and service use, most consumption shifted to imported consumer goods such as mobile phones, home appliances, and furniture."

The trade deficit with China, the world's largest consumer goods producer, also increased significantly. Last year, the US trade deficit with China was $355.3 billion, up $45 billion or about 15% from the previous year. This figure is close to the record high US-China trade deficit of $375.2 billion recorded in 2017.

The surge in energy and raw material import prices due to the COVID-19 impact and supply chain issues was also cited as a cause of the worsening trade deficit. According to MarketWatch, the average US crude oil import price last year was $60.40 per barrel, a 65% increase from $36.66 in 2020.

US household debt also rose sharply, increasing the burden on economic recovery. On the same day, the Federal Reserve Bank of New York (FRB) reported that US household debt last year reached $15.6 trillion, up $1.02 trillion (6.8%) from $14.6 trillion the previous year. This is the largest increase since $1.06 trillion in 2007.

This increase is attributed to Americans taking on more debt to purchase higher-priced homes and vehicles. The average US home price rose nearly 20% in 2021 alone, and due to price increases in new and used cars, auto loans reached a record high of $734 billion.

However, the Federal Reserve assessed that this increase in consumer loans is not at a level that should raise alarm. The Fed stated, "Debt increased across all income levels during the COVID-19 pandemic," and pointed out that consumer loan delinquency rates remain at historically low levels.

Additionally, about 87% of new debt is tied to housing, which is relatively stable, and the financial condition of current homeowners is also considered sound. The proportion of subprime mortgage borrowers in mortgage debt incurred in the fourth quarter of last year was only 2%, significantly lower than the average 12% during the years before the financial crisis, which helps reduce concerns.

The Fed cited the quarterly report on household debt and credit based on credit reports from the US credit rating agency Equifax, stating that credit card balances increased by $52 billion in the fourth quarter of last year. It is analyzed that suppressed demand for travel and entertainment, which was impossible during the early spread of COVID-19, exploded at the end of last year. Credit card balances sharply decreased in the early pandemic period, which was attributed to reduced consumption and stimulus payments. As of the end of last year, the total credit card balance was $856 billion, a 7.7% decrease from $927 billion two years earlier.

This content was produced with the assistance of AI translation services.