By Jo Constantz
The United States Bureau of Economic Analysis will release March’s international trade report on Tuesday. Economists expect both imports and exports to lift and the trade deficit to widen to a record high as the U.S. economic recovery fires on all cylinders.
Here are five things to watch for:
- Imports will soar with stimulus checks
Millions of Americans received stimulus checks in March, further buoying bank accounts already flush with savings from a year of quarantine. Consumers are expected to spend generously on imported goods, boosting imports which saw a slight drop in February. This increase in imports reflects the U.S.’s robust economic recovery and strong consumer demand as pandemic-related restrictions ease and businesses reopen.
- Exports will underperform with weak international demand
Trade partners lag behind the U.S.’s vaccine rollout and economic recovery, resulting in weak demand for exports. Europe continues to struggle with outbreaks and a troubled vaccination program, delaying the reopening of businesses and broader economic recovery. While March’s export numbers will likely reflect this weakness, economists are optimistic that Europe and other regions will begin to catch up to the U.S.’s economic recovery later this year.
- The semiconductor shortage will weigh on trade
The global semiconductor shortage has crippled the automotive industry, forcing companies like Ford and GM to temporarily close factories and halt production. The shortage has had deep impacts beyond car manufacturers: So many of our modern appliances––from washing machines and refrigerators to smartphones and cameras––rely on semiconductors to power their advanced technological capabilities. This shortage will constrain both imports and exports as manufacturers struggle to meet powerful consumer demand.
- Shipping will rebound from Texas freeze but remain constrained
Negative effects from the Texas snowstorm in February will be reversed in the March report, though trade will be restricted by congestion at the country’s major ports. Shipping delays and lengthy wait times are common as ports in Los Angeles, Long Beach, Seattle, and elsewhere are operating at maximum capacity. A global shipping container shortage is also hampering U.S. exporters, as the price of empty containers in Asia has skyrocketed. Container owners want to ship them back to Asia empty, so they can quickly rent them to an Asian exporter and avoid wasting time unloading.
- Tourism and business travel will stay sluggish
It remains to be seen how much tourism and business travel––one of the U.S.’s top service exports before the pandemic––will improve in March. While air travel in general has picked up, economists don’t expect to see much of a rebound as there are still many restrictions on international travel. Business travel and tourism may see a resurgence later in the year as international restrictions ease and vaccination programs gain momentum abroad.