“The Dynamics of the U.S. Trade Deficit During COVID-19: The Role of Essential Medical Goods” is an analysis from the St. Louis Fed’s Research Division, which documented‧‧‧
“The Dynamics of the U.S. Trade Deficit During COVID-19: The Role of Essential Medical Goods” is an analysis from the St. Louis Fed’s Research Division, which documented that “the heavy US dependence on imports of essential medical goods has been an important contributor to the recent widening of the U.S. trade deficit”. The Covid-19 pandemic has particularly hard hit international trade and has caused a sharp decline in overall trade flows. As showed by the authors, in the case of the United States, exports of goods dropped by almost 25% from January to June 2020, while imports dropped by about 17%. In addition, the US trade deficit increased by about 20%, reaching a value of $8.65 billion. “The vulnerability of the US trade system has been exposed by the heavy reliance on imports of essential medical goods”: Investment Consultant and Specialist Pompeo Pontone is convinced of this and, in the occasion of an intervention on the issue, explained the reason why it is key to balance comparative advantages with resilience.
The increased demand for essential medical goods has been a crucial driving force behind the widening US trade deficit: as stressed by the essay from the St. Louis Fed’s Research Division, this has been caused by the Covid-19 pandemic, as essential medical goods – gloves, masks, gowns, respirators, vaccines, medicines – are indispensable to combat the pandemic. The analysis showed that the widening of the gap between imports and exports of such products contributed to 41.3% of the increase in the US trade deficit. It is worth remembering that the production of essential medical goods is concentrated mainly in Asia, and most countries depend on imports of these goods. “Although trade allows countries with a competitive advantage in producing specific goods to specialize in their production process”, commented Pompeo Pontone, “it is also crucial to implement policies which can optimize the trade-off between comparative advantages and resilience”. Some additional figures about the United States: in 2018 the 36% of its total domestic consumption of essential medical goods was imported, with the United States accounting for 25% of world imports of these goods. It is equally important, the Investment Consultant and Specialist concluded, to implement adequate policies which can “reduce the risk of shortage of essential goods during global shocks”.
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As an Investment Consultant and Specialist, Pompeo Pontone is a Professional Investor with 25 years’ experience in the fields of Investment Management, Quantitative Finance & Derivatives Trading and Data Science.