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The US Trade Deficit

The dollar is weakening. We're entering into a massive trade deficit with China. The sky is falling. What does it all mean? Here are some nice graphs to help you make sense of it all.

Table of Contents

  1. General Information
  2. The United States' Top 15 Trading Partners
  3. Historical Information
  4. A Global Perspective
    1. The Top 20 Nations by International Trade
    2. The Top 20 Nations by GDP
    3. GDP Growth Rate
    4. Trade as a % of GDP
  5. Exchange Rate: Dollars to Euros
  6. Sources of Information

I also wrote an article on U.S. Government's Debt & Deficit.

1. General Information

After writing an article on the U.S. Government's Debt & Deficit, I realized so many people talk about our trade deficit & national debt in the same breath that it's important that I present some information about our trade deficit as well. Especially with all the talk of the declining dollar, I wanted to give some numbers to all the discussion.

I also updated my article on the Debt & Deficit to include some information I found on foreign debt. In a nuthshell, we owe roughly 20% of our debt to "non residents" and it's "repayable in foreign currency."

Note: Due to the different methodologies involved, comparisons from one chart to another may be difficult to make, and the numbers you see on one chart may not work with the numbers you see from another chart. I've included as much information about the methodologies used as I could find, and provided links to the original sources at the end.

Most noteworthy is the difference between trade that comprises goods & services, and trade that counts just goods.

2. The United States' Top 15 Trading Partners

Source: The U.S. Census Bureau
Top Trading Partners - Total Trade, Exports, Imports
Year-to-Date September 2004
Data are goods only, on a Census Basis, in billions of dollars.

I don't think there are any surprises here. Canada and Mexico are obvious choices for trade due to their proximity, and because you don't need to put anything on a boat to get there. China, Japan and Germany also shouldn't surprise anyone as being the top overseas traders with the USA.

You may notice that we seem to trade about the same amount with Mexico, China and Japan. This might be true, but there is an important difference in the export/import levels, so while we might trade $196 billion with Mexico and $165 billion with China, 41% of our trade with Mexico is exports, and only 15% of our trade with China is exports.

Interestingly, India isn't in the top 15 list. I suspect if this data included services it would be.

This graph shows much better then discrepancy betwen exports and imports. Here you can see just how big the trade deficit with china is. We import 5.5 times more from China than we export to them.

Keep in mind that this chart accounts for only 3/4 of the year.

3. U.S. Trade Historical Data

Source: The U.S. Census Bureau
U.S. Trade in Goods and Services - Balance of Payments (BOP) basis
Value in millions of dollars
1960 thru 2003

GDP Data from the Bureau of Economic Analysis

The US Census Bureau website has data going back to 1960, so that's how far I go back. During the 1960's we exported more than we imported, but our total trade was less than 3% of our GDP. Now we trade close to 25% of our GDP, and import much more than we export.

The same chart, adjusted for inflation, using U.S. Fiscal Year 2000 dollars. No real surprises here, this chart looks more or less like the one above.

Here you can see that trade has become a larger and larger portion of the US economy over the last 40 years. This chart also shows clearly that during the mid 70's, 80's and 90's, our exports dropped while imports continued to increase. Each time, creating a larger deficit.

GDP doesn't directly affect trade, but you can't export more than you make, and you can't import more than your economy will allow you to buy. This graph, then, shows how large trade has become in terms of to the economy as a whole.

This chart is my favorite of the group, It shows how much more we export than import and v.v. At 50% we're exporting just as much as we're importing. Below 50% we're in a deficit, and above 50% we're in a surplus. Since I know everyone loves comparing Republicans to Democrats, the 50% line is color coded - blue for Democrat, Red for Republican.

As of 2003, we're at 40%. In the mid 80's we were at 41% for four consecutive years. We've been in a trade deficit every year since 1976.

4. A Global Perspective

Looking at only the U.S. trade information doesn't tell the whole story because it doesn't give you anything to compare it with. How much do other nations trade? What portion of their economy is it? Are they also in a trade deficit? By comparing our information to that of other nations, a more cohesive picture comes in to view.

4a. The Top 20 Nations by International Trade

Source: The C.I.A. World Factbook
Exports: This entry provides the total US dollar amount of exports on an f.o.b. (free on board) basis.
Imports: This entry provides the total US dollar amount of imports on a c.i.f. (cost, insurance, and freight) or f.o.b. (free on board) basis.

This chart show the trade levels of the 20 top nations (sorted by Exports). As you can see, we export just sleightly more than Germany, but import a heck of a lot more.

This chart shows how much more or less the above nations import than export. It's a sort of of a barometer of the trade surplus/deficit, and regards each nation the same no matter what the volume of trading they do. I went to 35 nations on this chart so it could include India and Saudi Arabia.

4b. The Top 20 Nations by GDP

Source: The C.I.A. World Factbook
This entry gives the gross domestic product (GDP) or value of all final goods and services produced within a nation in a given year. GDP dollar estimates in the Factbook are derived from purchasing power parity (PPP) calculations.

As you can see, the United States produces far and away more than any other nation. We produce 21% of the world's goods and services, 70% more than China, and 484% more than Germany, who is our closest competition for top exporter of goods & services in the world.

4c. Global Growth Rate - Top 20 Nations

Source: The CIA World Factbook
This entry gives GDP growth on an annual basis adjusted for inflation and expressed as a percent.

The United States ranks number 105 with a growth rate of 3%. Germany clocks in at number 190 with a growth rate of 0%. Japan is number 123 with a growth rate of 3%. Canada is #151 with 2%, and Mexico is number 167 with 1%. Iraq is at the very end of the list with a GDP Growth Rate of -22% (negative twenty two percent).

4d. Trade as a % of GDP

This chart combines data from sections 4a and 4b.

It shows goods exported & imported as a percent of GDP. Countries that depend heavily on trade would be hurt more by shifting market forces in other countries than countries that don't. Germany or Japan with 56% ane 54% respectively are affected by global market forces much more than India at only 4%. The USA is at 18%.

You may notice than an earlier chart puts the US exports and imports at 10% and 15% of GDP. I believe the discrepancy is because that chart includes services as part of trade, and this one does not.

5. Exchange Rate: Dollars to Euros

Source: (The U.S. Treasury doesn't have historical data online)

There's a lot of talk lately about the decline of the dollar. This chart shows how many dollars it takes to buy 1 Euro.

I'm sorry I didn't do more currencies. They're not impossible to get, but tedious to collect. If someone has a better source for historical exchange rates, drop me a line.

This is a bit of a work-in-progress, I may update it at a later date with more interesting things.

Good information here:

page first created on Wednesday, December 15, 2004

© Mark Wieczorek