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Trade deficit in US shrinks by largest margin since 2009.

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The US trade deficit saw its biggest decline since 2009 last year, with imported goods decreasing in value and the services surplus increasing. The annual trade shortfall shrank nearly 19% to $773.4 billion, as reported by the Commerce Department. In December, the deficit slightly widened from the prior month to $62.2 billion, with figures unadjusted for inflation.

This shrinking trade gap reflects the efforts of companies to limit inventory buildup, therefore restraining demand for imports. Moreover, American consumers shifted their spending preferences towards services and experiences following a pandemic-driven binge on merchandise. The decrease in the trade deficit also contributed to economic growth, with net exports adding to gross domestic product for seven straight quarters. In December, the merchandise trade deficit on an inflation-adjusted basis narrowed to $82.8 billion, further reflecting the progress made by US companies in untangling supply chains and revamping logistics networks to better handle disruptions.

Notably, US bilateral trade figures reveal a more complex global trading system, with the nation’s merchandise deficit with China shrinking by 27% to an unadjusted $279.4 billion, while the gap with Mexico grew to a record $152.4 billion. Additionally, US trade shortfalls reached annual records with Germany, South Korea, Taiwan, India, and Italy. These trends in global trade emphasize the interconnectedness of economies and the impact of factors such as supply chain disruptions and changing consumer preferences, ultimately shaping trade patterns between nations.

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