On Wednesday, the U.S. Department of Commerce's Bureau of Economic Analysis released data indicating that the U.S. current account deficit reached a record high of $310.9 billion in the third quarter, rising by $35.9 billion from the previous quarter, an increase of 13.1%. The ratio of the current account deficit to gross domestic product (GDP) rose from 3.7% in the second quarter to 4.2%, the highest since the first quarter of 2022. This outcome far exceeded economists' previous expectations of $284 billion, reflecting strong import growth and reduced income contributing to the deficit.
Current Account Deficit and Trade Dynamics
The current account deficit is a key measure of the flow of goods, services, and investments. In the third quarter, U.S. goods imports increased by $23.7 billion to $837.2 billion, the highest since the second quarter of 2022. This growth was mainly driven by capital goods (such as computer accessories, electrical equipment, and components) and consumer products (including pharmaceuticals and other medical products).
In contrast, goods exports only increased by $13.6 billion to $530 billion, mainly driven by demand for capital goods (such as semiconductors and civil aircraft). This caused the goods trade deficit to widen from $297.2 billion in the second quarter to $307.3 billion, the highest in over a year.
In terms of primary income, total income decreased by $15.5 billion to $345.7 billion, while expenses decreased by $3.8 billion to $361.2 billion, leading the primary income surplus to turn into a deficit, registering a record deficit of $15.496 billion.
Economists Warn of Dual Deficit Risk
Although the dollar's status as the global reserve currency temporarily mitigates the direct impact of large deficits, economists worry that the persistence of this trend could trigger a potential crisis. Capital Economics' Chief North America Economist Paul Ashworth noted that the U.S. can no longer offset the deficit through primary income surplus, and the "dual deficit" issue of government budget deficit and current account deficit is gradually evolving into a comprehensive debt or currency crisis.
Data shows the U.S. government budget deficit reached $1.833 trillion in the 2024 fiscal year, the highest outside of the COVID-19 pandemic period, growing by 8% year-over-year. Ashworth pointed out, "We must closely monitor the dual deficit, as it will pose a threat to long-term economic stability."
Future Outlook and Policy Challenges
The increase in the third-quarter deficit indicates that the U.S.'s position in global trade and investment is facing challenges. While imports have grown strongly, export growth remains weak, further exacerbating trade imbalances. The shift from a primary income surplus to a deficit also reflects a decline in corporate profits and investment returns, highlighting the complex situation facing the U.S. economy.
Experts suggest that the U.S. needs to formulate more robust trade and fiscal policies, reduce import dependence and boost export competitiveness, while effectively managing domestic fiscal conditions to avoid further deteriorating the dual deficit issue and potentially triggering a debt crisis. As global economic uncertainty increases, the U.S. deficit problem will become an important indicator of economic stability.
