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This report provides an overview of the current status, trends, and forecasts for U.S. international
trade. The purpose of this report is to provide current data and brief explanations for the various
types of trade flows, particularly U.S. exports, along with a short discussion of particular trends
and points of contention related to trade policy.
The United States is now running huge deficits in its trade with other nations. Between 2006 and
2007 the U.S. merchandise trade deficit declined slightly from $838 billion to $819 billion on a
balance-of-payments (BoP) basis and from $817 billion to $790 billion on a Census basis. A 2007
surplus in services trade of $119 billion resulted in a deficit of $700 billion on goods and services
for the year—down $53 billion or 7.0% from the $753 billion deficit in 2006. While U.S. exports
are highly competitive in world markets, these sales abroad are overshadowed by the huge
demand by Americans for imported products. In 2007, U.S. exports of goods and services totaled
$1,646 billion, while U.S. imports reached $2,346 billion. Since 1976, the United States has
incurred continual merchandise trade deficits with annual amounts fluctuating around an upward
trend. The current slowdown in the U.S. economy plus the declining value of the dollar have
worked to reduce the deficit.
Trade deficits are a concern for Congress because they may generate trade friction and pressures
for the government to do more to open foreign markets, to shield U.S. producers from foreign
competition, or to assist U.S. industries to become more competitive. As the deficit increases, the
risk also rises of a precipitous drop in the value of the dollar and disruption in financial markets.
Compared to a Federal Reserve index of currencies weighted by importance to U.S. trade, the
dollar has lost a third of its value since 2002. In 2007, the dollar again fell against major
currencies.
Overall U.S. trade deficits reflect excess spending (a shortage of savings) in the domestic
economy and a reliance on capital imports to finance that shortfall. Capital inflows serve to offset
the outflow of dollars used to pay for imports. Movements in the exchange rate help to balance
trade. The rising trade deficit (when not matched by capital inflows) places downward pressure
on the value of the dollar which, in turn, helps to shrink the deficit by making U.S. exports
cheaper and imports more expensive. Central banks in countries such as China, however, have
intervened in foreign exchange markets to keep the value of their currencies from rising too fast.
The broadest measure of U.S. international economic transactions is the balance on current
account. In addition to merchandise trade, it includes trade in services and unilateral transfers. In
2007, the deficit on current account fell to a revised $738.6 billion from a revised $811.5 billion
in 2006. In trade in advanced technology products, the U.S. balance improved from a deficit of
$44 billion in 2005 to a deficit of $38 billion in 2006, but deteriorated to $53 billion in 2007. In
trade in motor vehicles and parts, the $121 billion U.S. deficit in 2007 was mainly with Japan,
Mexico, Germany, and South Korea. In crude oil, major sources of the $237 billion in imports
were Canada, Saudi Arabia, Venezuela, Nigeria, and Mexico. This report will be updated
periodically.
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Most Recent Developments............................................................................................................. 1
Trade in Goods.................................................................................................................... 1
Trade in Services................................................................................................................. 1
Trade in Goods and Services .............................................................................................. 1
The U.S. Deficit in International Trade ........................................................................................... 2
Savings Shortfalls and the Trade Deficit................................................................................... 3
Implications of the Trade Deficit .............................................................................................. 4
Types of Trade Data .................................................................................................................. 7
U.S. Merchandise Trade Balance .................................................................................................... 7
Merchandise Trade Balance in Volume Terms .............................................................................. 10
Current Account Balance............................................................................................................... 13
Forecasts........................................................................................................................................ 15
U.S. Trade with Selected Nations.................................................................................................. 16
Advanced Technology, Autos, and Oil .......................................................................................... 22
Some Common Perceptions .......................................................................................................... 25
Outsourcing ............................................................................................................................. 25
Is the Trade Deficit at a Dangerous Level? ............................................................................. 26
Is Trade with China Merely Replacing That with Southeast Asia? ............................................... 27
International Trade Statistics Web Resources................................................................................ 29
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Figure 1. Monthly U.S. Balances of Trade in Goods and Services, 2007 and 2008 (in
Current Dollars)............................................................................................................................ 2
Figure 2. Month-End Trade-Weighted U.S. Dollar Against Broad, Major Currencies, and
Other Important Trading Partner Indices, January 2000-October 2008 ....................................... 5
Figure 3. U.S. Merchandise Exports, Imports, Trade Balance, and Real Effective Dollar
Exchange Rate Index, 1982-2007 ................................................................................................ 8
Figure 4. Real U.S. Imports, Exports, and Trade Balance of Goods (chained 2000
dollars), 1990-2007 .................................................................................................................... 10
Figure 5. Annual Growth in U.S. Merchandise Exports and Imports, 1982-2007 ....................... 12
Figure 6. U.S. Current Account and Merchandise Trade Balances, 1982-2007 ........................... 13
Figure 7. U.S. Merchandise Trade and Current Account Deficits, 1997-2010 (Forecast in
Current Dollars).......................................................................................................................... 16
Figure 8. U.S. Merchandise Trade Balances With Selected Nations, 2007................................... 17
Figure 9. Shares of U.S. Imports of Goods by Affiliation of Foreign Producer, 1998-2004........ 26
Figure 10. The U.S. Current Account Deficit as a Percent of Gross Domestic Product,
1985-2010 (forecast) .................................................................................................................. 27
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Table 1. U.S. Exports, Imports, and Merchandise Trade Balances, 1982-2007 .............................. 9
Table 2. U.S. Merchandise Trade in Volume Terms, 2001-2007 ....................................................11
Table 3. U.S. Current Account Balances: 1985-2007.................................................................... 14
Table 4. U.S. Merchandise and Current Account Trade, 2003 to 2010 (Forecast) ....................... 15
Table 5. U.S. Merchandise Trade Balances with Selected Nations and Groups, 2002-2007 ........ 18
Table 6. Top U.S. Merchandise Deficit Trading Partners, 2007.................................................... 19
Table 7. Top U.S. Trading Partners Ranked by Total Merchandise Trade in 2007........................ 20
Table 8. U.S. Current Account Balances With Selected U.S. Trading Partners, 2007 ................. 21
Table 9. U.S. Trade in Advanced Technology Products ................................................................ 23
Table 10. U.S. Trade in Motor Vehicles and Parts by Selected Countries, 2007.......................... 24
Table 11. U.S. Imports of Crude Oil from Selected Countries, 2007 ............................................ 24
Table 12. Changes in U.S. Merchandise Trade Balances With Selected Countries and
Groups, 2006 and 2007 .............................................................................................................. 28
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Author Contact Information .......................................................................................................... 30
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In 2007, the trade deficit in goods reached $819.4 billion on a balance of payments (BoP) basis,
down $18.9 billion from $838.3 billion in 2006. The 2007 deficit on merchandise trade with
China was $256.2 billion (Census basis), with the European Union (EU-27) was $107.2 billion,
with Japan was $82.8 billion, with Canada was $68.2 billion, with Mexico was $74.6 billion, and
the Asian Newly Industrialized Countries (Hong Kong, South Korea, Singapore, and Taiwan) was
$3.9 billion. Imports of goods of $1,957.0 billion increased by $99.8 billion (5.6%) over 2006.
Increases in imports by sector were: crude oil up $20.6 billion, capital goods except automotive
up $26.2 billion, automotive vehicles and parts up $2.3 billion, and consumer goods up $32.3
billion. Exports of goods of $1,162.5 billion rose by $125.8 billion (12.1%), particularly in
industrial supplies, up $40.3 billion, capital goods except automotive up $32.4 billion, automotive
vehicles and parts up $14.1 billion, and consumer goods up $17.0 billion. Exports grew faster
than imports, which narrowed the trade deficit in goods. Increasing U.S. exports were credited
with growth in U.S. gross domestic product (GDP) remaining positive in 2008. However, the
contribution of net exports to GDP growth disappeared in November. From January
through November, 2008, U.S. exports of goods rose 15%, above their 2007 average. By
contrast, U.S. imports of goods increased 9.5% above their 2007 average. U.S. exports and
imports of goods began to decline in July, 2008. In November, exports of goods were $23.6
billion lower and imports were $45.3 billion lower than in July 2008.
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In 2007, total annual imports of services of $378.1 billion and exports of $497.2 billion yielded a
surplus in U.S. services trade of $119.1 billion. The U.S. service industries, particularly, financial
services, tourism, shipping, and insurance, tend to compete well in international markets. 2008
U.S. services exports and imports peaked in August, and have declined each month since.
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In goods and services, total imports in July 2008 of $229.5 billion were the highest in the year
and in U.S. history. Imports of goods and services have declined each month since July through
November 2008. July total exports of goods and services of $168.4 billion were the highest in
year 2008 and U.S. history. The latest monthly deficit on goods and services, for November 2008,
was $40.4 billion, below the record high set in July 2006 of $67 billion.. For January through
November 2008, the monthly goods and services balance fluctuated above and below the
2007 levels. The total deficit of $630.9 billion for January through November 2008, was less
than the equivalent period for 2007, of $642.7 billion. The November 2008 monthly balance
on goods and services of -$40.4 is the lowest monthly deficit in three years.
For 2007, the annual trade deficit on goods and services amounted to 5.1% of U.S. gross domestic
product (GDP, $13.8 trillion in 2007), down slightly from 5.4% in 2006. A level of 5% for
countries is considered to be cautionary by economic observers. At that level, other countries
have experienced problems paying for imports and maintaining the value of their currency.
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Figure 1. Monthly U.S. Balances of Trade in Goods and Services, 2007 and 2008 (in
Current Dollars)
$Billions
20
Se
S r
e vices
e 2008
2008
Services 2007
$
$
$
$
$
$
$
$
$
$
$
0
-20
-40
$
-60
$
$
$
$
$
$
$
$
$
$
Goods 2007
Goods 2008
-80
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Month
Source: CRS with Data from the U.S. Department of Commerce.
Figure 1 shows U.S. trade balances in goods and services by month. 2007 data is graphed in bars;
2008 data is graphed in lines. In 2007, the monthly surplus in services gradually rose from $7.8
billion to $11.9 billion. The 2008 monthly services balance averages $12 billion. Total 2007
annual imports of services of $378.1 billion and exports of $497.2 billion yielded a surplus in
U.S. services trade of $119.1 billion.1 In 2008, the monthly surplus in services trade has been
higher than equivalent months in 2007, although the November services balance was only slightly
higher than the equivalent month for 2007. The 2008 balance on trade in goods has been greater
than equivalent months in 2007 with the exception of the months of March and November. For
2008, this monthly goods deficit has been averaging -$69.4 billion per month, compared with
-$68.2 in 2007.
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International trade in goods and services along with flows of financial capital affect virtually
every person living in the United States. Whether buying imported clothes, gasoline, computers
or cars, or working in an industry that competes with imports, or sells products abroad, the
influence of international trade on economic activity is ubiquitous.
The United States in now running record deficits in its trade with other nations. In 2007 the U.S.
merchandise trade balance reached $794.5 billion on a Census basis and $819.4 billion on a
balance-of-payments basis (BoP). Still, the 2007 merchandise trade deficit presents an
1 Monthly trade data are available from the U.S. Bureau of Economic Analysis at http://www.bea.gov/newsreleases/
International/trade/2008/pdf/trad0808.pdf.
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improvement over 2006, in which the U.S. merchandise trade deficit reached $817.3 billion on a
Census basis and $838.3 billion on a balance-of-payments basis (BoP). A surplus in services trade
of $119.1 billion in 2007 produced a deficit of $700.3 billion on goods and services for the year—
lower than the $753.3 billion in 2006 and the $711.6 billion goods and services deficit in 2005.
While U.S. exports are highly competitive in world markets, U.S. sales abroad are overshadowed
by the huge demand by Americans for imported products. In 2007, U.S. exports of goods and
services totaled $1.646 trillion, while U.S. imports reached $2.346 trillion (BoP). Since 1976, the
United States has incurred continual merchandise trade deficits with annual amounts fluctuating
around an upward trend.
For the Congress, the trade deficit and other aspects of international trade enter into public policy
considerations through many portals. At the macroeconomic level, trade deficits are a concern
because they affect U.S. economic growth, interest rates, labor, and the debt load of the economy.
As the trade deficit rises relative to the total economy, the risk increases that the dollar will
weaken, raise prices, disrupt financial markets, and reduce the economic well being of the
population. On the strategic level, trade ties often lead to a deepening of bilateral relations with
other nations that can develop into formal free trade agreements or political and security
arrangements. Trade also can be used as a tool to accomplish strategic objectives—particularly
through providing preferential trading arrangements or by imposing trade sanctions.
On the microeconomic side, imports of specific products can generate trade friction and pressures
from constituent interests for the government to shield U.S. producers from foreign competition,
provide adjustment assistance, open foreign markets, or assist U.S. industries to become more
competitive.
This report provides an overview of the current status, trends, and forecasts for U.S. import and
export flows as well as certain balances. The purpose of this report is to provide current data and
brief explanations for the various types of trade flows along with a brief discussion of trends that
may require attention or point to the need for policy changes. The use of trade policy as an
economic or strategic tool is beyond the scope of this report but can be found in various other
CRS reports.2 Further detail on trade in specific commodities, with particular countries or regions,
or for different time periods, can be obtained from the Department of Commerce,3 U.S.
International Trade Commission,4 or by contacting the authors of this report.
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Overall U.S. trade deficits reflect a shortage of savings in the domestic economy and a reliance on
capital imports to finance that shortfall. A savings shortfall is the analogue of excessive spending
that is financed by borrowing. Households borrow for consumption; businesses borrow to invest;
2 See, for example,CRS Report RL31832, The Export Administration Act: Evolution, Provisions, and Debate, by Ian F.
Fergusson; CRS Report RL33463, Trade Negotiations During the 110th Congress, by Ian F. Fergusson; CRS Report
RL31356, Free Trade Agreements: Impact on U.S. Trade and Implications for U.S. Trade Policy, by William H.
Cooper; CRS Report RL32371, Trade Remedies: A Primer, by Vivian C. JonesCRS Report RL32493, The North
Korean Economy: Leverage and Policy Analysis, by Dick K. Nanto and Emma Chanlett-Avery or CRS Report
RL33652, The Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW):
Congressional Issues, by Luisa Blanchfield.
3 Commerce Department data are available at http://www.bea.gov/.
4 U.S. International Trade Commission data are available at http://dataweb.usitc.gov/.
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and the government borrows to cover its budget deficit. At the international transaction level, the
savings shortfall is manifest when the United States imports capital to pay for its excess of
imports (trade deficit).
Whether this foreign borrowing is beneficial for the U.S. economy depends on how the imports of
capital are used. If they are used to finance investments that generate a future return at a
sufficiently high rate (they raise future output and productivity), then they may increase the well
being of current and future generations. However, if the imports are used only for current
consumption, the net effect of the borrowing will be to shift the burden of repayment to future
generations without a corresponding benefit to them.
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U.S. trade balances are macroeconomic variables that may or may not indicate underlying
problems with the competitiveness of particular industries or what some refer to as the
competitiveness of a nation. The reason is that overall trade flows are determined, within the
framework of institutional barriers to trade and the activities of individual industries, primarily by
macroeconomic factors such as rates of growth, savings and investment behavior (including
government budget deficits/surpluses), international capital flows, and exchange rates.5
Increases in trade deficits may diminish economic growth, since net exports (exports minus
imports) are a component of gross domestic product. In the late 1980s and early 1990s, export
growth was an important element in overall U.S. economic growth. In 2006, merchandise exports
accounted for about 7.7% of GDP, compared with 5.9% in 1990. Recently, however, rising trade
deficits have reduced total domestic demand in the economy, but the weakness in the trade sector
has been offset by strong consumer, business, and government demand.
Many economists fear that the rising U.S. trade and current account6 deficits could lead to a large
drop in the value of the U.S. dollar. The current account deficit, while decreasing from 6.2% of
GDP in 2006 to 5.1% of GDP in 2007, continues to place downward pressure on the dollar. A
weakened dollar boosts exports by making them cheaper, narrowing the U.S. trade deficit.
Compared to a Federal Reserve index of major currencies weighted by importance to U.S. trade,
the dollar has lost a third of its value since 2002 (see Figure 2). The dollar has fallen against the
euro, yen, British pound, Australian dollar, and Canadian dollar. In fact, the U.S. dollar fell to
parity with the Canadian loonie in September 2007 for the first time in thirty years, and remains
roughly in that range. Between July and November 2008, the U.S. dollar strengthened against
other currencies as the global financial crisis increased “safe haven demand” for the dollar. Since
November, the dollar has lost some value, partly due to the Federal Reserve’s lowering of interest
rates.
5 For further information on trade deficits and the macroeconomy, seeCRS Report RL31032, The U.S. Trade Deficit:
Causes, Consequences, and Cures, by Craig K. ElwellandCRS Report RL33186, Is the U.S. Current Account Deficit
Sustainable?, by Marc Labonte.
6 U.S. trade in goods and services plus net flows of investment income and remittances.
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Figure 2. Month-End Trade-Weighted U.S. Dollar Against Broad, Major Currencies,
and Other Important Trading Partner Indices, January 2000-October 2008
Index
160
Other Important Trading
Partners
140
120
100
80
Major Currencies
60
Broad
40
20
0
Jan -00 Jul -00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07Jan -08 Jul -08
Month-Year
Source: Federal Reserve Bank of St. Louis, http://research.stlouisfed.org/.
Notes: Broad Index (January 1997 = 100): Euro Area, Canada, Japan, Mexico, China, United Kingdom,
Taiwan, Korea, Singapore, Hong Kong, Malaysia, Brazil, Switzerland, Thailand, Philippines, Australia, Indonesia,
India, Israel, Saudi Arabia, Russia, Sweden, Argentina, Venezuela, Chile and Colombia.
Major Currencies Index (January 1973 = 100): Euro Area, Canada, Japan, United Kingdom, Switzerland,
Australia, and Sweden.
Other Important Trade Partners Index (January 1997 = 100): Mexico, China, Taiwan, Korea, Singapore,
Hong Kong, Malaysia, Brazil, Thailand, Philippines, Indonesia, India, Israel, Saudi Arabia, Russia, Argentina,
Venezuela, Chile and Colombia.
Although a weakened dollar helps to reduce U.S. trade imbalances, it also may reduce the dollar’s
attractiveness to foreign investors. If foreign investors stop offsetting the deficit by buying dollar-
denominated assets, the value of the dollar could drop—possibly precipitously. In that case, U.S.
interest rates would have to rise to attract more foreign investment; financial markets could be
disrupted; and inflationary pressures could increase. In the International Monetary Fund’s May
2006 consultation with the United States, for example, its directors reiterated their long-standing
concerns about the large U.S. current account deficit. They stated that “there is broad agreement
that the large U.S. current account deficit ... cannot be sustained indefinitely. Although a gradual
adjustment is the most likely outcome, delaying progress increases the risk of fanning
protectionist sentiment or disorderly foreign exchange market conditions.”7
Currently, foreign investment in dollar assets along with purchases of securities by central banks
of countries, such China and Japan, have been sufficient to keep the value of the dollar from
falling too far. These central banks have intervened in currency markets to keep their exchange
7 IMF, 2005 Article IV Consultation with the United States of America. Concluding Statement of the IMF Mission.
May 31, 2006.
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rates relatively stable with respect to the dollar, although Japan claims not to have intervened
since spring of 2004. This intervention adds to the foreign currency reserves held by these
countries. As of the end of December 2007, Japan’s central bank held $948 billion in foreign
currency reserves,8 and the Bank of China held $1,528 billion.9 In U.S. Treasury securities, as of
December 2007, Japan held $581 billion and China $477 billion.10 On July 21, 2005, China
announced a 2.1% revaluation of its currency, and the value of the renminbi has appreciated
steadily from 8.2 to 7.0 renminbi per dollar (15%). Continuing in that range, on May 30, 2008,
the renminbi was trading at 6.9 per dollar.
A recent development in foreign country holdings of dollars and other reserve currencies is that
some are turning toward creating sovereign wealth funds (SWFs). These are funds owned by
governments that are invested in stocks, bonds, property, and other financial instruments
denominated in dollars, euros, or other hard currency. For China, Japan, South Korea, Russia, and
the oil-exporting nations of the Persian Gulf, the source of capital for these funds is coming from
governmental holdings of foreign exchange. For China and Japan, for example, foreign exchange
reserves have traditionally been invested by their respective central banks primarily in low-
yielding but low-risk government bonds, i.e., U.S. Treasury securities. The purpose of sovereign
wealth funds is to diversify investments and to earn a higher rate of return. For example, in
September 2007, China created a sovereign wealth fund—the China Investment Corporation
(CIC)—with initial capital of $200 billion. One of the largest SWFs, CIC already has bought a
10% ($3 billion) share (non-voting) of the initial public offering of the Blackstone Group, a U.S.
private equity group. Morgan Stanley research estimates that such sovereign wealth funds could
hold up to $12 trillion by 2015.11 Depending on how these funds are managed and what leverage
they acquire, they could affect U.S. interest rates (foreign purchases of U.S. Treasury securities
tend to reduce U.S. interest rates), corporate activities (if funds buy significant voting shares of
companies), and foreign access to technology and raw materials. The U.S. trade deficit provides
some of the foreign exchange that goes to finance these sovereign wealth funds.12
How long can the United States keep running trade deficits? U.S. deficits in trade can continue
for as long as foreign investors are willing to buy and hold U.S. assets, particularly government
securities and other financial assets.13 Their willingness depends on a complicated array of factors
including the perception of the United States as a safe haven for capital, relative rates of return on
investments, interest rates on U.S. financial assets, actions by foreign central banks, and the
savings and investment decisions of businesses, governments, and households. The policy levers
8 Statistics on Japanese international reserves are released on a monthly basis by the Japanese Ministry of Finance and
available at https://www.mof.go.jp/english/.
9 Statistics on Chinese international reserves are available from the Chinability website, a non-profit website that
provides Chinese economic and business data and analysis, at http://www.chinability.com/.
10 Statistics on foreign holdings of U.S. Treasury securities are available at http://www.treasury.gov/tic/mfh.txt. For
further information, seeCRS Report RS22331, Foreign Holdings of Federal Debt, by Justin Murray and Marc Labonte.
11 Morgan Stanley, Currencies, How Big Could Sovereign Wealth Funds Be by 2015? Morgan Stanley Research, May
3, 2007.
12 For more information on sovereign wealth funds, see CRS Report RL34336, Sovereign Wealth Funds: Background
and Policy Issues for Congress, by Martin A. Weiss, CRS Report RL34337, China’s Sovereign Wealth Fund, by
Michael F. Martin.
13 See Mann, Catherine L. Is the U.S. Trade Deficit Sustainable? Washington, Institute for International Economics,
1999. 224 p. See also:CRS Report RL33274, Financing the U.S. Trade Deficit, by James K. Jackson.CRS Report
RL31032, The U.S. Trade Deficit: Causes, Consequences, and Cures, by Craig K. Elwell.
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that influence these factors that affect the trade deficit are held by the Federal Reserve14 (interest
rates) as well as both Congress and the Administration (government budget deficits and trade
policy), and their counterpart institutions abroad.
In the 110th Congress, legislation directed at the trade deficit is taking several strategies. Some
address trade barriers by particular countries, particularly China. Others are aimed at preventing
manipulation of exchange rates or at imposing import duties to compensate for the arguably
undervalued Chinese currency.15 Other bills seek to find domestic substitutes for imported oil, or
require the President or a policy group to take certain actions if the trade deficit exceeded a
threshold amount (for instance, a bilateral trade deficit of $10 billion or 2% of GDP). Legislation
is tracked in other CRS reports dealing with trade.
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The U.S. government compiles trade data in four different ways. The data on goods trade are first
compiled on a Census basis. Bilateral and sectoral data are reported only on a Census basis. The
Census numbers are then adjusted and reported monthly on a balance of payments (BoP) basis
that includes adjustments for valuation, coverage, and timing and excludes military transactions.
The data are finally reported in terms of national income and product accounts (NIPA). The NIPA
data also can be further adjusted to include correcting for inflation to gauge movement in trade
volumes as distinct from trade values. Conceptually, this procedure is analogous to adjusting
macroeconomic data from nominal to real values.
The Census Bureau also reports imports on a c.i.f. (cost, insurance, and freight) basis which
includes the value of insurance, international shipping, and other charges incurred in bringing
merchandise to U.S. ports of entry. The customs (or f.a.s.—free alongside ship) data do not
include these supplementary costs. U.S. import data are reported on a customs basis with
insurance and freight charges counted in U.S. services trade. Other countries, however,
commonly report merchandise import figures that include insurance and freight charges. This
tends to overstate their imports and understate their trade surpluses with the United States.
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The merchandise (goods) trade balance is the most widely known and frequently used indicator of
U.S. international economic activity (see Figure 3). In 2007, total U.S. merchandise trade
amounted to $3,116 billion, an 8% increase from $2,884 billion in 2006. Merchandise exports in
2007 totaled $1,148 billion, while imports reached $1,965 billion (BoP basis). The U.S.
merchandise trade deficit declined 2.3% from $838 billion in 2006 to $819 billion in 2007. Prior
to this, the merchandise deficit increased in double-digit rates by 22% in 2004 and 18% in 2005.
The deficit increase slowed in 2006, increasing by only 6.5%. The rate of increase in the deficit,
therefore, has tapered off.
14 For details, seeCRS Report RS20826, Structure and Functions of The Federal Reserve System, by Pauline Smale.
15 For legislation related to trade with China and the Chinese currency, seeCRS Report RL33536, China-U.S. Trade
Issues, by Wayne M. Morrison
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Figure 3. U.S. Merchandise Exports, Imports, Trade Balance, and
Real Ef ective Dol ar Exchange Rate Index, 1982-2007
Source: U.S. Department of Commerce: IMF.
Note: Exchange Rate, 1995+100.
U.S. merchandise exports (as shown in Table 1 and Figure 4, decreased in 2001 and 2002 in
response to the global slowdown, but generally have been increasing each year. As shown in
Figure 4, the growth of imports has also been steady, although they too fell by 4.4% in 2001
before recovering in 2002. In 2003, import growth was nearly double export growth, although in
2004, export growth almost caught up with that of imports, and in 2005, the rate of increase for
both dropped slightly (11% for exports and 14% for imports). In 2006, exports grew by 14%,
while imports grew by 11%. Growth in exports and imports slowed in 2007, with exports rising
by 12.3% and imports by 5.7%. Exports grew faster than imports, but the trade deficit still
increased. This is because U.S. imports are about 71% greater than U.S. exports, so exports must
grow about 71% faster than imports just for the deficit to remain constant.
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Table 1. U.S. Exports, Imports, and Merchandise Trade Balances, 1982-2007
(billions of U.S. dollars)
Census basis
Balance of payments basis
Exports
Imports
Exports
Imports
Year (f.a.s.)a (customs)b Trade Balance
(f.a.s.) a
(customs)b Trade Balance
1982
212.3 243.9
-31.6 211.2 247.6
-36.4
1983
201.7 261.7
-60.0 201.8 268.9
-67.1
1984
218.7 330.5
-111.8 219.9 332.4
-112.5
1985
212.6 336.4
-123.8 215.9 338.1
-122.2
1986
226.4 365.7
-139.3 223.3 368.4
-145.1
1987
253.9 406.3
-152.4 250.2 409.8
-159.6
1988
323.3 441.9
-118.6 320.2 447.2
-127.0
1989
362.9 473.4
-110.5 359.9 477.7
-117.8
1990
392.9 495.2
-102.3 387.4 498.4
-111.0
1991
421.8 487.1
-65.3 414.1 491.0
-76.9
1992
448.2 532.6
-84.4 439.6 536.5
-96.9
1993
464.8 580.5
-115.7 456.9 589.4
-132.5
1994
512.6 663.2
-150.6 502.9 668.7
-165.8
1995
584.7 743.5
-158.8 575.2 749.4
-174.2
1996
625.1 795.3
-170.2 612.1 803.1
-191.0
1997
689.2 869.7
-180.5 678.4 876.5
-198.1
1998
682.1 911.9
-229.8 670.4 917.1
-246.7
1999
695.8 1,024.6
-328.8 684.0 1,030.0
-346.0
2000
781.9 1,218.0
-436.1 772.0 1,224.4
-452.4
2001
730.9 1,142.3
-411.4 718.7 1,145.9
-427.2
2002
693.5 1,163.6
-470.1 681.8 1,164.7
-482.9
2003
724.8 1,257.1
-532.3 713.1 1,260.7
-547.6
2004
818.8 1,469.7
-650.9 807.5 1,477.1
-669.6
2005
906.0 1,673.5
-767.5 894.6 1,681.8
-787.2
2006
1,036.6 1,853.9
-817.3 1,023.1 1,861.4
-838.3
2007
1,162.5 1,957.0
-794.5 1,148.5 1,967.9
-819.4
Source: U.S. Department of Commerce, Bureau of Economic Analysis, U.S. International Transactions Accounts
Data.
Note: Goods on a Census basis are adjusted to a BoP basis to include changes in ownership that occur without
goods passing into or out of the customs territory of the United States, to eliminate duplication, and to value
transactions according to a standard definition. Export adjustments include counting military sales as services not
goods, adding private gift parcels, and foreign official gold sales from U.S. private dealers. Import adjustments
include adding in inland freight in Canada and foreign official gold sales to U.S. private dealers, and subtracting
imports by U.S. military agencies.
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a. Exports are valued on an f.a.s. basis, which refers to the free alongside ship value at the port of export and
generally include inland freight, insurance, and other charges incurred in placing the goods alongside the
carrier at the port of exportation.
b. Imports are valued as reported by the U.S. Customs Service, known as Customs basis, and exclude import
duties, the cost of freight, insurance, and other charges incurred in bringing merchandise to the United
States.
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Like other economic variables, exports and imports, reported in terms of their values, can change
merely because prices change. Trade data, therefore, can be adjusted for inflation by dividing by a
chained price index (chained price indexes are weighted by two-year averages) to generate real or
volume data (some trade commodities actually are reported in volume terms [e.g., tons of
wheat]). The real data provide a more accurate picture of how the underlying flows of
merchandise are changing. As with the nominal trade deficit, the real deficit has begun to
decrease.
Figure 4. Real U.S. Imports, Exports, and Trade Balance of Goods
(chained 2000 dollars), 1990-2007
Source: CRS with data from U.S. Bureau of Economic Analysis. National Income and Products Accounts data,
Table 4.2.6, http://www.bea.gov/.
As shown in Table 2 and http://www.bea.gov/.
Figure 5, the constant-dollar value, or physical volume, of merchandise exports increased by
9.9% in 2006, up from 7.5% in 2005 and 9.0% in 2004. The physical volume of imports rose by
6.0% in 2006, down from 6.6% in 2005 and 11.3% in 2004, but up from 4.9% in 2003. Because
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the growth of merchandise imports is higher than the growth of exports and because imports
exceed exports by more than 80% on a physical volume basis, exports would have to grow more
than 80% faster than imports just for the U.S. trade deficit in terms of volume to remain constant.
In 2005 and 2006, export growth actually exceeded import growth, but the deficit still increased.
In recent years, the deficit in volume terms has varied relative to the deficit in value terms partly
because of fluctuations in oil import prices (when oil prices rise, the deficit in value rises relative
to that in volume terms).
Table 2. U.S. Merchandise Trade in Volume Terms, 2001-2007
(billions of chained 2000 dollars)
Export
Import
Real Trade
Year Exports Growth
Imports
Growth
Balance
2001 736.3 -6.1
1,204.1 -3.2
-467.8
2002 707.0 -4.0
1,248.2 3.7
-541.2
2003
719.8 1.8
1,309.3 4.9 -589.5
2004 784.4 9.0
1,457.0 11.3
-672.6
2005
843.5 7.5
1,553.6 6.6 -710.1
2006
927.4 9.9
1,646.9 6.0 -719.5
2007
1,000.8 7.9
1,673.5 1.6 -672.7
Source: CRS calculations from Bureau of Economic Analysis, National Income and Products Accounts data,
Table 4.2.6, http://www.bea.gov/.
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Figure 5. Annual Growth in U.S. Merchandise Exports and Imports,
1982-2007
Source: Underlying data from U.S. Department of Commerce.
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The current account provides a broader measure of U.S. trade because it includes services,
investment income, and unilateral transfers in addition to merchandise trade (see). The balance on
services includes travel, transportation, fees and royalties, insurance payments, and other
government and private services. The balance on investment income includes income received on
U.S. assets abroad minus income paid on foreign assets in the United States. Unilateral transfers
are international transfers of funds for which there is no quid pro quo. These include private gifts,
remittances, pension payments, and government grants (foreign aid). Data on the current account
lag those on trade by several months.
Figure 6. U.S. Current Account and Merchandise Trade Balances,
1982-2007
Source: CRS with data from U.S. Bureau of Economic Analysis, U.S. International Transactions Account.
Table 3 summarizes the components of the U.S. current account. In 2006, the U.S. deficit on
current account increased to $811.5 billion from $754.8 billion in 2005. As a share of U.S. GDP,
this deficit rose to 6.2% in 2006. In 2007 the U.S. deficit on current account decreased to $738.6
billion, or 5.3 % of GDP. This remains above the caution level used by the International Monetary
Fund of 5%. Since the dollar is used as an international reserve currency, however, the United
States can run trade deficits without the same downward pressure on the value of the dollar as
other nations. Historically, the current account deficit fell from a then record-high $160.7 billion
in 1987 to $79.0 billion in 1990, and switched to a $3.7 billion surplus in 1991 (primarily because
of payments to fund the Gulf War by Japan and other nations). However, since a slight decline in
1995, the current account deficit has been increasing significantly except for a slight dip in 2001
because of the U.S. recession and a similar situation in 2007.
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Table 3. U.S. Current Account Balances: 1985-2007
(billions of dollars)
Merchandise
Investment
Net
Current
Calendar
Trade
Services
Income
Unilateral
Account
Year
Balancea
Balanceb
Balancec
Transfersd
Balancee
1985 -122.2
0.3
25.7
-22.0
-118.2
1986 -145.1
6.5
15.5
-24.1
-147.2
1987 -159.6
7.9
14.3
-23.3
-160.7
1988
-127.0 12.4 18.7 -25.3
-121.2
1989
-117.7 24.6 19.8 -26.2 -99.5
1990
-111.0 30.2 28.6 -26.7 -79.0
1991
-76.9 45.8 24.1 10.8 3.7
1992
-96.9 57.8 24.2 -33.1 -48.0
1993
-132.5 62.3 25.3 -37.1 -82.0
1994
-165.8 67.4 17.1 -36.8
-118.0
1995
-174.2 77.9 20.9 -34.1
-109.5
1996
-191.0 87.1 22.3 -38.6
-120.2
1997
-198.1 89.8 12.6 -45.2
-140.9
1998 -246.7
81.7
4.3
-53.2
-214.9
1999
-346.0 82.6 13.9 -50.6
-300.1
2000
-452.4 74.1 21.0 -58.8
-416.4
2001
-427.2 64.5 25.2 -51.9
-389.4
2002
-485.0 61.2 27.4 -64.9
-461.3
2003
-550.9 54.0 45.3 -71.8
-523.4
2004
-669.6 61.8 67.2 -84.5
-625.0
2005
-787.1 75.6 72.4 -89.8
-729.0
2006
-838.3 85.0 57.2 -92.0
-788.1
2007
-819.4 119.1 81.7 -112.7 -731.2
Source: U.S. Bureau of Economic Analysis, U.S. International Transactions. On the Internet at
http://www.bea.gov/bea/international/bp_web/simple.cfm?anon=68365&table_id=1&area_id=3.
a. On a BoP basis.
b. Includes travel, transportation, fees and royalties, insurance payments, other government and private
services, and investment income.
c. Income receipts on U.S. assets abroad minus income payments on foreign assets in the United States.
d. International transfers of funds, such as private gifts, pension payments, and government grants for which
there is no quid pro quo.
e. The trade balance plus the service balance plus investment income balance plus net unilateral transfers,
although conceptually equal to the current account balance, may differ slightly as a result of rounding.
Because the merchandise trade balance comprises the greater part of the current account, the two
tend to track each other. Unlike the merchandise trade balance, however, the services account
registered a $79.7 billion surplus in 2006 and $106.9 billion surplus in 2007. Since Americans are
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such large investors in foreign economies, the United States traditionally also has a surplus in its
investment income. The deficit in unilateral transfers (primarily dollars sent abroad by foreign
workers and recent immigrants) totaled $89.6 billion in 2006 and $104.4 billion in 2007.
Unilateral transfers have now reached more than triple the level of the late 1980s.
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According to Global Insight, Inc., a leading U.S. economic forecasting firm, in 2008 the U.S.
merchandise (goods) trade deficit is projected to decline to about $931.9 billion on a balance of
payments basis and to stay at the level for 2009 and 2010 (see Table 4 and Figure 7). The U.S.
current account deficit declined from the peak of $811.5 billion in 2006 to $749.6 billion in 2007.
The current account deficit is forecasted to increase to $763.6 billion 2008 and then to decrease in
2009 and 2010.
Table 4. U.S. Merchandise and Current Account Trade,
2003 to 2010 (Forecast)
(billions of U.S. dollars)
2003 2004 2005 2006 2007 2008 2009 2010
Merchandise Trade
Exports
Actual
713.4 807.5 894.6 1,023.1 1,148.5
—
—
—
Forecasted
— — — — —
1,330.8
1,281.7
1294.1
Imports
Actual
1264.3 1477.1 1,681.8 1,861.4 1,967.9
—
—
—
Forecasted
— — — — —
2,145.1
1,723.8
1,890.2
Trade Balance
Actual
-550.9 -669.6 -787.1 -838.3 -819.4
—
—
—
Forecasted
— — — — —
-797.7
-429.9
-581.8
Services Trade Balance
Actual
54.0 61.8 75.6 85.0 119.1 — — —
Forecasted
— — — — —
147.4
165.2
175.1
Current Account Balance
Actual
-523.4 -625.0 -729.0 -788.1 -731.2
—
—
—
Forecasted
— — — — —
-679.7
-342.0
-489.0
Sources: U.S. Bureau of Economic Analysis and Global Insight (BoP basis).
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Figure 7. U.S. Merchandise Trade and Current Account Deficits, 1997-2010 (Forecast
in Current Dollars)
$Billions
200
Actual
Forecast
0
-200
-400
Goods Trade
-600
-800
Current Account
-1000
97
98
99 2000 01
02
03
04
05
06
07
08
09
10
Year
Sources: U.S. Bureau of Economic Analysis and Global Insight (BoP basis).
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The overall U.S. merchandise trade balance consists of deficits or surpluses with each trading
partner. Many economists view the overall figure as more significant than bilateral trade balances,
since rising deficits with some nations are often offset by declining deficits or growing surpluses
with others. Nonetheless, abnormally large or rapidly increasing trade deficits with particular
countries are often viewed as indicators that underlying problems may exist with market access,
the competitiveness of particular industries, currency misalignment, or macroeconomic
adjustment. Figure 8 and Table 5 show U.S. trade balances with selected nations.
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Figure 8. U.S. Merchandise Trade Balances With Selected Nations, 2007
Source: CRS with data from the U.S. Department of Commerce (Census basis).
Most of the U.S. trade deficit can be accounted for by trade with China, Japan, Mexico, Canada,
and Germany. Trade with the oil exporting countries, particularly Nigeria, Venezuela, and Saudi
Arabia, also is in deficit. U.S. trade surpluses occur in trade with the Netherlands, Hong Kong,
Australia, and the United Arab Emirates.
The U.S. trade deficit with China has soared over the past decade. From $32 billion in 1995 to
$100 billion in 2000 and $256 billion in 2007, the negative net balance in trade with China has
grown to account for nearly 30% of the total U.S. trade deficit.16 The U.S. trade deficit with
China exceeded that with Japan for the first time in the year 2000 and now is more than three
times as large.
China claims that its trade is less imbalanced than U.S. data indicate. Chinese trade data differ
from those of the United States primarily because of the treatment of Hong Kong as an entrepot.
Since Hong Kong is a separate customs area from mainland China, Beijing counts Hong Kong as
the destination for its exports sent there, even though the goods may be transshipped to other
markets. For example, China would count a laptop computer that is assembled in Shanghai but
shipped through Hong Kong before being exported to the United States as a sale to Hong Kong.
By contrast, the United States and many of China’s other trading partners count Chinese exports
that are transshipped through Hong Kong as products from China not Hong Kong, including
16 For details and policy discussion, seeCRS Report RL31403, China’s Trade with the United States and the World, by
Thomas Lum and Dick K. Nanto, orCRS Report RL33536, China-U.S. Trade Issues, by Wayne M. Morrison.
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goods that contain Hong Kong components or involve final packaging in Hong Kong. The United
States also counts Hong Kong as the destination of U.S. products sent there, even those that are
then reexported to China. However, the PRC counts many of such reexported goods as U.S.
exports to China. So by U.S. figures, U.S. exports to China tend to be understated, while by
Chinese figures, Chinese exports to the U.S. tend to be understated. The net result is that China’s
reported trade surplus with the United States at $163 billion in 2007 is a little over 60% of the
reported U.S. deficit with China of $256 billion.
Table 5. U.S. Merchandise Trade Balances with Selected Nations and Groups, 2002-
2007
(millions of U.S. dollars, Census basis)
Country
2002 2003 2004 2005 2006 2007
Total
-468,263 -532,350 -650,930 -767,477 -817,304 -794,483
North America
-85,311 -92,319 -111,547 -128,230 -136,056
-142,791
Canada
-48,165 -51,671 -66,480 -78,486 -71,782 -68,169
Mexico
-37,146 -40,648 -45,067 -49,744 -64,274 -74,622
Europe
-93,355 -105,603 -119,907 -132,269 -123,016 -121,077
European Union 27
-86,377 -98,521 -109,999 -123,123 -117,216 -107,168
United
Kingdom
-7,540 -8,967 -10,274 -12,445 -8,103 -6,629
Germany
-35,876 -39,281 -45,850 -50,567 -47,763 -44,513
France
-9,224 -12,166 -10,342 -11,432 -12,822 -14,140
Italy
-14,164 -14,854 -17,413 -19,485 -20,109 -20,878
Netherlands
8,462 9,742 11,839 11,623 13,787 14,560
Russia
-4,473 -6,171 -8,930 -11,344 -15,127 -11,949
Pacific Rim Countries
-310,170 331,869 405,298 -469,223 -513,662 -366,459
Japan
-69,979 -66,032 -75,562 -82,519 -88,568 -82,760
China
-103,065 -124,068 -161,938 -201,545 -232,589 -256,207
Newly Industrialized
Countries (NICS)
-22,080 -21,217 -21,883 -15,782 -11,783 -3,904
Singapore
1,416 1,422 4,238 5,532 6,916 7,891
Hong
Kong
3,266 4,669 6,513 7,459 9,829 13,092
Taiwan
-13,766 -14,152 -12,879 -12,757 -15,165 -11,968
Republic
of
Korea
-12,996 -13,157 -19,755 -16,016 -13,362 -12,918
South/Central American Countries
-17,952 -26,883 -37,183 -50,460 -44,706 -27,345
Argentina
-1,602 -732 -357 -462 797 1,369
Brazil
-3,405 -6,699 -7,263 -9,064 -7,136 -1,019
Colombia
-2,022 -2,629 -2,751 -3,387 -2,557 -876
OPEC
-34,433 -51,064 -71,843 -92,867 -105,289 -112,987
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Country
2002 2003 2004 2005 2006 2007
Venezuela
-10,664 -14,305 -20,153 -27,557 -28,131 -29,709
Indonesia
-7,087 -6,999 -8,139 -8,960 -10,346 -10,066
Saudi
Arabia
-8,369 -13,473 -15,702 -20,380 -24,049 -25,230
Nigeria
-4,888 -9,377 -14,694 -22,618 -25,630 -29,992
Sources: United States Census Bureau, Foreign Trade Statistics. For other countries and further detail, see U.S.
International Trade in Goods and Services Annual Revision for 2007, FT-900 (08-04), released June 10, 2008.
Note: Trade Balance equals Total Exports (f.a.s. value) minus General Imports (Customs value).
Table 6 lists the U.S. top deficit trading partners in merchandise trade, on a Census basis. In
2000, China overtook Japan as the top U.S. deficit trading partner. After, China, the next highest
deficit trading partners are Japan, Mexico, Canada, Germany, and Nigeria.
Table 6. Top U.S. Merchandise Deficit Trading Partners, 2007
(millions of U.S. dollars)
Country
U.S. Balance
U.S. Exports
U.S. Imports
China -256,207
65,236
321,443
Japan -82,760
62,704
145,463
Mexico -74,622
136,092
210,714
Canada -68,169
248,888
317,057
Germany -44,513
49,651
94,164
Nigeria -29,992
2,778
32,770
Venezuela -29,709
10,201
39,910
Saudi Arabia
-25,230
10,396
35,626
Ireland -21,436
9,009
30,445
Malaysia -20,948
11,680
32,629
Italy -20,878
14,150
35,028
Algeria -16,164
1,652
17,816
Thailand -14,300
8,455
22,755
France -14,140
27,413
41,553
Korea -12,918
34,645
47,562
Taiwan -11,968
26,309
38,278
Russia -11,949
7,365
19,314
Angola -11,227
1,280
12,508
Indonesia -10,066
4,235
14,301
Iraq -9,835
1,560
11,396
Vietnam -8,730
1,903
10,633
Sweden -8,530
4,494
13,024
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Country
U.S. Balance
U.S. Exports
U.S. Imports
Israel -7,775
13,019
20,794
Austria -7,497
3,172
10,669
Trinidad and Tobago
-7,010
1,780
8,790
Source: U.S. Department of Commerce. U.S. International Trade in Goods and Services, FT 900 (08-04).
Note: Data are on a Census basis. Exports are valued f.a.s.; imports are valued Customs.
Table 7 lists the United States’ top trading partners ranked by trade turnover, defined as exports
plus imports. As shown in Table 7, in 2007, as in 2006, Canada was America’s largest total
merchandise trading partner. Canada was followed by China, Mexico, Japan, Germany, the
United Kingdom, Korea, Taiwan and France. Malaysia dropped from number 10 in total U.S.
trade in 2006 to number 14 in 2007. Canada was the largest supplier of U.S. imports in 2006 and
before, but in 2007 China surpassed Canada. By far, Canada is the top purchaser of U.S. exports
with Mexico second. In 2007 China passed Japan to become third. Japan is now our fourth-
ranked export market.
Table 7. Top U.S. Trading Partners Ranked by Total Merchandise Trade in 2007
(millions of U.S. dollars)
Rank
Country
Total Trade
U.S. Exports
U.S. Imports
Balance
1 Canada
565,944.9 248,888.1 317,056.8
-68,168.7
2 China
386,679.0 65,236.1 321,442.9
-256,206.7
3 Mexico
346,806.1 136,092.1 210,714.0
-74,621.8
4 Japan
208,166.8 62,703.5 145,463.3
-82,759.9
5 Germany
143,815.1 49,651.0 94,164.1
-44,513.1
6 United
Kingdom 107,086.2 50,228.7 56,857.5
-6,628.9
7
Korea, South
82,207.1
34,644.8
47,562.3
-12,917.5
8 France
68,965.3 27,412.5 41,552.7
-14,140.2
9 Taiwan
64,586.8 26,309.2 38,277.6
-11,968.4
10 Netherlands
51,366.3
32,963.2
18,403.1
14,560.0
11 Brazil
50,269.7
24,625.6
25,644.2
-1,018.6
12 Venezuela
50,110.1
10,200.5
39,909.6
-29,709.1
13 Italy
49,177.3
14,149.6
35,027.6
-20,878.0
14
Saudi Arabia
46,021.9
10,395.9
35,626.0
-25,230.1
15 Singapore
44,677.8
26,284.2
18,393.7
7,890.5
16 Malaysia
44,308.7
11,680.2
32,628.5
-20,948.3
17 India
41,661.8
17,588.5
24,073.3
-6,484.7
18 Belgium
40,570.9
25,289.7
15,281.2
10,008.5
19 Ireland
39,453.9
9,008.9
30,445.0
-21,436.2
20 Nigeria
35,548.2
2,778.0
32,770.2
-29,992.2
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Rank
Country
Total Trade
U.S. Exports
U.S. Imports
Balance
21 Israel
33,813.8
13,019.3
20,794.4
-7,775.1
22 Switzerland
31,799.5
17,039.3
14,760.2
2,279.1
23 Thailand
31,209.3
8,454.6
22,754.7
-14,300.0
24 Australia
27,826.8
19,211.7
8,615.0
10,596.7
25
Hong Kong
27,143.8
20,117.8
7,026.0
13,091.8
Source: U.S. Department of Commerce. U.S. International Trade in Goods and Services, FT 900 (08-04).
Notes: Total trade=imports + exports. Data are on a Census basis. Exports are valued f.a.s.; imports are valued
Customs.
Table 8 lists trade balances on goods, services, and income, net unilateral transfers and current
account balances for selected U.S. trading partners. While trade in services, flows of income from
investments, and remittances home by foreign workers are considerably smaller than merchandise
flows, as the economy has become more globalized and service-oriented, these components of the
current account have become more important. In many cases, the bilateral current account
balances are quite different from bilateral balances on merchandise trade only.
Table 8. U.S. Current Account Balances With
Selected U.S. Trading Partners, 2007
(billions of U.S. dollars)
Merchandise
Investment
Net
Current
Trade
Services
Income
Unilateral
Account
Country
Balancea
Balanceb
Balancec
Transfersd
Balancee
All Countries
-819.4
119.1
81.7
-112.7
-731.2
Mexico
-77.6
8.0
1.6
-12.5
-80.5
Canada
-70.6
18.1
16.9
-1.7
-37.3
Asia and Pacific
-410.3
33.1
-47.5
-21.0
-445.7
China
-256.6
5.4
-36.1
-2.4
-289.7
Japan
-85.1
15.0
-41.2
1.2
-110.3
S. Korea
-13.9
4.8
-0.2
-0.6
-10.0
European Union
-113.9
36.7
39.6
-4.7
-42.4
Germany
-45.3
-6.0
1.2
-1.2
-51.2
United
-7.6
16.5
-2.2
4.5
11.2
Kingdom
Latin America
-105.3
22.8
27.1
-30.0
-85.5
Middle East
-33.8
0.1
-3.3
-12.0
-49.0
Source: U.S. Bureau of Economic Analysis, International Transactions Account Data.
a. On a BoP basis.
b. Includes travel, transportation, fees and royalties, insurance payments, other government and private
services, and investment income.
c. Income receipts on U.S. assets abroad minus income payments on foreign assets in the United States.
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d. International transfers of funds, such as private gifts, pension payments, and government grants for which
there is no quid pro quo.
e. The trade balance plus the service balance plus investment income balance plus net unilateral transfers,
although equal to the current account balance, may differ as a result of rounding.
Country data for current account are now final for 2007. Since Japan has invested considerable
amounts in securities, equities, and in factories in the United States, the United States ran a deficit
of $41.2 billion in investment income with that country in 2007. This more than offset the surplus
of $15 billion in trade in services with Japan. As a result, the current account deficit with Japan of
$110.3 billion in 2007 exceeded the bilateral merchandise trade deficit of $85.1 billion. Likewise
with China; the U.S. deficit on investment income of $36.1 billion far overshadowed the U.S.
surplus of $5.4 billion in services.
In 2007, a different situation existed with the European Union and Canada. The United States
earned a $39.6 billion surplus in investment income with the EU in 2007, greater than 2006
investment income surplus of $12.6 billion. In 2007, the U.S. surplus in services with the EU
came to $36.7 billion. These two flows offset a merchandise deficit of $113.9 billion to produce a
U.S. current account deficit of $42.4 billion, lower than the 2006 current account deficit of $86.9
billion. From Canada the United States received $16.9 billion in investment income plus a surplus
in services trade of $18.1 billion. Hence, the current account deficit with Canada at $37.3 billion
was lower than the $70.6 billion merchandise trade deficit.
The rising deficit with many countries in investment income reflects the accumulating debt
relative to the world of the United States. Inflows of capital to compensate for the U.S. trade
deficit and low U.S. savings rate help to maintain the value of the dollar, but interest paid and
other income that accrues to that capital is often repatriated to the home countries. That means
more capital must be invested in the United States or the United States must export more to
compensate for the outflows of investment income. In 2007, the overall U.S. balance on
investment income registered a surplus of $81.7 billion, higher than the 2006 balance on
investment income of $57.2 billion. Imbalances in investment income with certain countries have
been growing and could become a problem in the future.
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Table 9 shows U.S. trade in advanced technology products. This includes about 500 commodity
classification codes representing products whose technology is from a recognized high
technology field (e.g., biotechnology) or that represent the leading technology in a field. The
United States long ran a surplus in these products, but that surplus dropped sharply in 2000 and
turned into a deficit in 2002. The U.S. trade balance in high technology products was last in
surplus in 2001.
In 2002 to 2005, the U.S. ran a trade deficit in high technology products which grew roughly ten
billion dollars per year, from $16.6 billion to $43.6 billion. In 2006 this deficit dropped to $38.1
billion, but in 2007 resumed its former path of growing ten billion dollars per year, to $52.6
billion. This 2007 deficit represents about a 40% increase over 2006. This does not necessarily
imply the United States is losing the high technology race, since many of the high technology
imports are from U.S. companies (particularly electronics manufacturers) who assemble the
products overseas. However, this growing deficit may warrant closer policy scrutiny.
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Table 9. U.S. Trade in Advanced Technology Products
(billions of U.S. dollars)
Year
U.S. Exports
U.S. Imports
Trade Balance
1990 93.4
59.3
34.1
1995 138.4
124.8
13.6
1996 154.9
130.4
24.5
1997 179.5
147.3
32.2
1998 186.4
156.8
29.6
1999 200.3
181.2
19.1
2000 227.4
222.1
5.3
2001 200.1
195.3
4.8
2002 178.6
195.2
-16.6
2003 180.2
207.0
-26.8
2004 201.4
238.3
-36.9
2005 216.1
259.7
-43.6
2006 252.7
290.8
-38.1
2007 274.2
326.8
-52.6
Source: U.S. Bureau of the Census. U.S. International Trade in Goods and Services. FT-900, issued monthly.
Notes: Includes about 500 of some 22,000 commodity classification codes that meet the following criteria: (1)
contains products whose technology is from a recognized high technology field (e.g., biotechnology), (2) represent
leading edge technology in that field, and (3) constitute a significant part of all items covered in the selected
classification code. Data are on a BoP basis.
Table 10 provides data on trade in passenger cars with major automobile producing nations for
2007. This does not include foreign cars assembled in the United States. The United States incurs
the largest deficits in this trade with Japan, Mexico, Germany, South Korea, and Canada. The
U.S. trade balance in motor vehicles improved from a $144,990 million deficit in 2006 to a
$120,941 million deficit in 2007, a nearly 17% change.17
17 For information on the automobile industry, seeCRS Report RL32883, U.S. Automotive Industry: Recent History and
Issues, by Stephen Cooney and Brent D. Yacobucci.
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Table 10. U.S. Trade in Motor Vehicles and Parts by
Selected Countries, 2007
(millions of U.S. dollars)
Trading Partner
U.S. Exports
U.S. Imports
Trade Balance
Total World
124,621
245,562
-120,941
Japan 2,315
55,276
-52,961
Mexico 19,189
49,927
-30,738
Germany 8,881
24,532
-15,651
Korea 938
11,312
-10,374
Canada 60,833
65,800
-4,967
United Kingdom
2,507
5,450
-2,943
Source: U.S. Bureau of the Census, U.S. International Trade in Goods and Services, FT-900 (08-04).
Table 11 shows imports of crude petroleum by major country source. In 2007, the United States
imported $246 billion in crude oil or 13% of all imports. Roughly half comes from the
Organization of the Petroleum Exporting Countries (OPEC) with Saudi Arabia, Venezuela, and
Nigeria the predominant suppliers. Imports from Iraq are recovering with $11 billion worth in
2007. Over 40% of U.S. petroleum imports come from non-OPEC sources, primarily Canada and
Mexico.18
Table 11. U.S. Imports of Crude Oil from Selected Countries, 2007
(quantity and customs value)
Country
Customs Value
Quantity
($ million)
(thousand barrels)
Total World
245,771
3,812,663
OPEC Total
145,839
2,190,303
Saudi Arabia
33,870
516,375
Venezuela 32,143
517,179
Nigeria 30,882
417,672
Algeria 14,506
204,636
Angola 12,130
182,999
Iraq 10,874
171,628
Ecuador 4,360
71,611
Kuwait 3,754
61,725
Libya 2,612
35,698
18 For policy discussion, seeCRS Report RS22204, U.S. Trade Deficit and the Impact of Rising Oil Prices, by James K.
Jackson.
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Country
Customs Value
Quantity
($ million)
(thousand barrels)
Indonesia 474
7,475
United Arab Emirates
233
3,307
Qatar 0
0
Iran 0
0
Non-OPEC Total
99,932
1,622,359
Canada 38,330
660,738
Mexico 30,523
507,066
Brazil 3,761
59,719
Colombia 3,548
51,822
Russia 3,169
45,287
Congo 2,895
40,974
United Kingdom
2,543
36,464
Chad 2,107
35,858
Gabon 2,099
30,127
Other Non-OPEC
10,957
154,304
Sources: U.S. Census Bureau, U.S. International Trade in Goods and Services, FT-900, issued monthly, and World Trade
Atlas, using Harmonized Schedule (HS) 270900 for crude oil.
Note: Census basis data.
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This section of the report addresses a few common perceptions about trade that can be validated
by data.
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A common perception is that an increasing amount of U.S. imports are actually goods
manufactured overseas by American-affiliated companies. U.S. manufacturers have moved
production abroad in search of lower production costs or other economic advantages and are
sending their product back to the American market.
Figure 9 shows the percentage of U.S. imported products by affiliation of the foreign producer.
The total value of such imports from foreign affiliates of U.S. parent companies rose from $39.3
billion in 1982 to $209.1 billion in 2004, but the percentage of total U.S. imports accounted for
by these imports has been fairly constant at around 15%. In 1982, such imports accounted for
15.9% of total imports, while in 2004 they accounted for 14.2% of the total. These are products
such as American branded computers assembled in China in a subsidiary affiliated with a U.S.
company.
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The share of imports from foreign parent companies with affiliates in the United States has been
rising somewhat—from 21.0% in 1982 to 21.7% in 2004. This reflects the growing foreign direct
investment in the United States and includes imports such as transmissions from a Japanese
automaker for use in its assembly plant located in the United States.
Imports from unaffiliated foreigners account for about 60% of all imported goods. Their share has
risen somewhat from 63.2% in 1982 to 64.1% in 2004. The latest currently available data is from
2004.
Figure 9. Shares of U.S. Imports of Goods by Affiliation of
Foreign Producer, 1998-2004
Source: CRS with Data from U.S. Bureau of Economic Analysis.
Note: 2004 data is latest available for this series as of 2008.
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The International Monetary Fund has used its experience with currency and exchange rate crises
to say that caution should be exercised when a nation’s current account deficit reaches a level of
5% of gross domestic product. At this level, nations have difficulty borrowing to finance imports
and the nation’s exchange rate may come under severe downward pressure. The United States is a
special case, since the dollar is a secondary medium of exchange (one can use dollars in many
foreign countries without exchanging them for local currency) and dollars are used extensively as
an official reserve currency by national banks. Still, the IMF has been warning that the size of the
U.S. current account deficit could cause a large depreciation of the dollar and disrupt financial
markets.
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Figure 10 shows the U.S. current account balance as a percent of nominal U.S. gross domestic
product (GDP). It grew in magnitude from near zero in 1980 to 3.4% in 1987, dropped into
negative 0.1% in 1991 and rose to 6.2% in 2006 (exceeding the 5% level considered to warrant
caution by the International Monetary Fund). The current account balance-GDP ratio remained
above the IMF caution level for 2007 at 5.3%. However, beginning in 2008 through 2010, it is
predicted to decline to below the IMF caution level.
Figure 10. The U.S. Current Account Deficit as a Percent
of Gross Domestic Product, 1985-2010 (forecast)
Sources: Data from U.S. Department of Commerce. Forecasts by Global Insight, Inc.
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Some observers claim that the rising U.S. imports from China are merely displacing those from
other East Asian nations. Labor intensive industries, such as apparel, shoes, and consumer
electronics, that produce for export to the United States and other industrialized nations are
simply moving to China from Southeast Asian nations, including South Korea, and Taiwan. The
overall level of imports from Asia is not changing. Its composition is just shifting toward China.
For specific industries, the shift in imports from traditional Asian exporting nations to China is
clear. In woven apparel (HS 62), for example, in 1990, Hong Kong, South Korea, and Taiwan
accounted for 33.4% of U.S. imports as compared to China with a 14.7% share. By 2006, China
accounted for 35.3% of such imports, as compared to 4.9% for Hong Kong, South Korea, and
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Taiwan combined. In 2007, China’s contribution to U.S. imports of woven apparel increased to
35.7%. Hong Kong, South Korea, and Taiwan collectively represented 3.4% of such imports, a
decline from 2006.19 The decline in woven apparel imports from Hong Kong, South Korea, and
Taiwan also may reflect their shift to production of high-technology goods. As these Southeast
Asian countries continue to industrialize, woven apparel imports from less-developed countries,
such as Indonesia, Bangladesh, and Vietnam, likely will continue to increase.
In terms of overall imports, however, U.S. imports from Hong Kong, Taiwan, and South Korea
rose from $50.6 billion (10.2% of total U.S. imports) in 1990 to $92.9 billion (4.7% of total) in
2007, while imports from China rose from $15.2 billion (3.3% of total) in 1990 to $321.4 billion
(16.4% of total) in 2007.20 Clearly, the share of U.S. imports from Hong Kong, Taiwan, and South
Korea has been falling, while the share of imports from China is rising. The value of U.S. imports
from both, however, continues to rise, while the value of those from China is rising faster.
The large U.S. trade deficit with China, moreover, is not just a transfer of the deficit from other
Asian nations to China. The U.S. trade deficit with Hong Kong, Taiwan, and South Korea has
gone from $17.9 billion (17.5% of the total U.S. deficit) in 1990 to $11.8 billion (1.5% of the
total) in 2007. U.S. trade with Hong Kong actually went from a deficit in 1992 to a surplus in
1993, and has remained in surplus through 2007. The U.S. trade deficit with China, meanwhile,
went from $10.4 billion (10.2% of the total U.S. trade deficit) in 1990 to $256.2 billion (32.2% of
the total) in 2007. What actually is happening is quite complex. While the U.S. trade deficit with
the world is declining, it continues to rise with China, Mexico and oil exporting countries. Table
12 illustrates this complexity. Negative percentage change numbers, noted in bold, indicate a
shrinking U.S. merchandise trade deficit with that country or group. Positive percentage changes
indicate growing deficits.
Table 12. Changes in U.S. Merchandise Trade Balances With
Selected Countries and Groups, 2006 and 2007
Country
2005 2006 2007 % Chg
% Chg
2006/2005
2007/2006
World
Total
-$767,477 -$817,304 -$794,483
6.5
-2.8
China
-$201,545 -$232,589 -$256,207
15.4
10.2
-OPEC-
-$104,217 -$119,825 -$127,414
15.0
6.3
-EU 27-
-$123,123 -$117,216 -$107,167
-4.8 -8.6
Japan
-$82,519 -$88,568 -$82,760
7.3
-6.6
Mexico
-$49,744 -$64,274 -$74,622
29.2
16.1
Canada
-$78,486 -$71,782 -$68,169
-8.5 -5.0
Germany
-$50,567 -$47,763 -$44,513
-5.6 -6.8
Nigeria
-$22,618 -$25,630 -$29,992
13.3
17.0
Venezuela
-$27,557 -$28,131 -$29,709
2.1
5.6
Saudi Arabia
-$20,380
-$24,049
-$25,230
18.0
4.9
19 Calculations based on data from World Trade Atlas, using HS 62 for woven apparel.
20 The numbers are comparable for all Asian countries.
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Country
2005 2006 2007 % Chg
% Chg
2006/2005
2007/2006
Malaysia
-$23,224 -$23,989 -$20,948
3.3
-12.7
Algeria
-$9,279 -$14,354 -$16,164
54.7
12.6
Thailand
-$12,633 -$14,320 -$14,300
13.4
-0.1
France
-$11,432 -$12,822 -$14,140
12.2
10.3
Hong Kong
$7,459
$9,829
$13,092
31.8
33.2
Korea, South
-$16,016 -$13,362 -$12,918
-16.6 -3.3
Taiwan
-$12,757 -$15,165 -$11,968
18.9
-21.1
Russia
-$11,344 -$15,127 -$11,949
33.4
-21.0
Asian 4 NICs
-$15,782 -$11,783 -$3,904
-25.3 -66.9
Source: U.S. Department of Commerce, Bureau of the Census via World Trade Atlas.
Notes: Merchandise trade data on a Census Basis. The U.S. balance with Hong Kong is positive. Members of OPEC
are listed in, above. Members of Asian 4 Newly Industrializing Countries (NICs) are: Hong Kong, Singapore, South
Korea and Taiwan.
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Listed below are a list of resources available online for international trade statistics.
The single most authoritative, comprehensive, and frequently-published trade data statistical
source is the monthly “FT900”. Its actual title is U.S. International Trade in Goods and Services.
The FT-900 is issued monthly by the U.S. Census Bureau and the U.S. Bureau of Economic
Analysis. It provides information on the U.S. trade in goods and services (balance, exports, and
imports) in specific commodities and end-use categories and with selected countries. The report
also provides information on trade in advanced technology, petroleum, and motor vehicle
products. The report is available from the U.S. Bureau of Economic Analysis at
http://www.bea.gov/newsreleases/rels.htm. Under “International” click on latest news release.
Information on trade in specific commodities, with particular regions, or for different time
periods also can be obtained from the U.S. International Trade Commission at
http://dataweb.usitc.gov/.
Historical and current U.S. exchange rate data are available from the Federal Reserve Bank of St.
Louis at http://research.stlouisfed.org/fred2/.
Information on foreign country holdings of U.S. Treasury securities are available at
http://www.treasury.gov/tic/.
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Dick K. Nanto
J. Michael Donnelly
Specialist in Industry and Trade
Information Research Specialist
dnanto@crs.loc.gov, 7-7754
mdonnelly@crs.loc.gov, 7-8722
Shayerah Ilias
Analyst in International Trade and Finance
silias@crs.loc.gov, 7-9253
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