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Many people worry about the large U.S. trade deficit, but the sources of that deficit get much less attention. The large and growing cost of imported oil is one source, but not the only one. And while there are trade deficits in some sectors, these are partly offset by trade surpluses in others. The U.S. trades a large number of goods and services with other countries, and focusing on the overall trade deficit alone masks the great variation in trade flows.
It may come as a surprise to many that, in 2007, there was a $119 billion surplus in services trade. This partly offset an $819 billion deficit in the trade of goods, for a net trade deficit of $700 billion, or 5 percent of GDP. This is down from $753 billion in 2006.
In the goods category, the tables below show that there were large trade deficits in Industrial Supplies, Automotive Vehicles, and Consumer Goods. The values of imports of Industrial Supplies (which includes imports of oil and petroleum-based products) and Automotive Vehicles were each twice that of exports. The value of Consumer Goods imports was three times that of exports. There were slight export surpluses in Food & Feed and in Capital Goods.
In the service sector, the largest trade surpluses were in Private Services and in the payment of Royalties and Licensing fees. The Private Services category includes a broad range of business, technical, financial, and insurance services, as well as "purchase and sale of securities and noninterest income of banks." There was also a slight surplus in Travel, which is the sum of all expenses associated with foreign travel, including lodging, tourism, and food. Here, imports refer to American stays abroad and exports refer to visits to America by foreigners.
Trade is a complex dynamic that can change greatly over time. In part II, we will look at changes in the trade balance that have taken place in the past year.
Source: Bureau of Economic Analysis, International Economic Accounts.
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My employer runs enormous and persistant trade deficits with me, each and every year. They pay me for my labor services, and I purchase nothing at all from them in return.
Some might argue, "ahh, but we are borrowing to finance this trade deficit, or selling all of our valuable assets!" Well, who is this "we"? If my neighbor runs persistant trade deficits, and does it all because he borrows to pay for this spending, how does that impact me? Will his credit card company come after ME for a collection?
It would be intersting to see the trade deficit data plotted against GDP growth over the past 200 years for a variety of countries, I suspect you might be surprised by it.
In any case, all of this fretting about trade statistics is a bit uninformed and misses the bigger, more complex, economic picture. If trade surpluses were so great, why weren't the 1930s better years for our economy? The NBER can tell you how many months of that entire decade the US ran a deficit - it wasn't many.
But maybe things will change. I like this from a Research Report in 2000: "Ironically, if investment flows were to shift in favor of other countries, many of the same commentators who are now warning about the dangers of the ballooning trade deficit probably would start to worry about foreign investors 'fleeing America.'"
It might be illuminating to also depict historic and recent trends regarding the U.S. current and capital accounts.