U.S. trade deficit soars to record high in January as imports rise

The U.S. trade deficit widened to a record high in January as imports increased and exports fell, the U.S. Commerce Department reported on Tuesday.

U.S. imports rose by 1.2 percent to 314.1 billion U.S. dollars in January while exports fell by 1.7 percent to 224.4 billion dollars. The goods and services deficit jumped 9.4 percent from the prior month to an all-time high of 89.7 billion dollars in January, according to the department.

"The widening of the trade deficit to a fresh record in January reflects the relative outperformance of the U.S. economy during a pandemic era characterized by volatile swings but generally an environment of faster growing imports and slower growing exports," Tim Quinlan and Shannon Seery, economists at Wells Fargo Securities, said Tuesday in an analysis.

"There is scope for some normalization in services exports in coming months as the virus situation has rapidly improved," the economists said, adding the ongoing Russia-Ukraine conflict could further dampen sentiment and prevent some people from traveling.

"Service exports still remain below pre-pandemic levels and continued recovery would help support the U.S. services surplus," they said.

Due to the widening trade deficit, trade has become a drag on U.S. economic growth for six straight quarters.

The U.S. economy is expected to grow at an annual rate of 1.8 percent in the first quarter of 2022, down from 7 percent in the fourth quarter of last year, amid the high inflation and fading fiscal support, analysts said.