U.S. International Trade: Trends and Forecasts
Dick K. Nanto
Specialist in Industry and Trade
J. Michael Donnelly
Information Research Specialist
May 26, 2010
Congressional Research Service
7-5700
www.crs.gov
RL33577
CRS Report for Congress
P
repared for Members and Committees of Congress
U.S. International Trade: Trends and Forecasts
Summary
The U.S. trade deficit was shrinking through June 2009 because of the global financial crisis but
has begun to increase again. The crisis caused U.S. imports to drop faster than U.S. exports. The
global simultaneous recession, however, implies that exporting countries cannot rely on increased
foreign demand to make up for slack demand at home. Even though U.S. imports are down
considerably from 2008, companies competing with imports still face diminishing demand as the
domestic economy has been hit by recession. These conditions imply that the political forces to
protect domestic industry from imports are likely to intensify both in the United States and
abroad.
In 2009, the trade deficit in goods reached $517.0 billion on a balance of payments (BoP) basis,
less than the $840.3 in 2008 and $831 billion in 2007. The 2008 deficit on merchandise trade with
China was $227 billion (Census basis), with the European Union was $60.5 billion, with Canada
was $20.2 billion, with Japan was $44.8 billion, with Mexico was $47.5 billion, and with the
Asian Newly Industrialized Countries (Hong Kong, South Korea, Singapore, and Taiwan) moved
from a deficit of $5.5 billion in 2007 to a surplus of $2.2 billion in 2008 and a surplus again in
2009 of $3.6 billion. Imports of goods of $1,562.6 billion decreased by $554.7 billion, 26.2%
over 2008. Exports of goods of $1,045.5 billion fell by $231.5 billion, 18.1%. The overall
merchandise trade deficit for 2009 improved, or rose, by $323.2 billion, or roughly 38.5%. In the
fourth quarter of 2008, as the U.S. recession worsened, imports declined faster than exports
resulting in monthly trade deficits declining from August 2008 through February 2009. In 2009
goods imports reached their lowest recent level in May, at $119.2 billion. In 2009 goods exports
fluctuated near $82 billion through May when they began to increase at about two billion
monthly, reaching $99.1 billion in December.
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. 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. Bills in the 111th Congress relating to
trade include: H.R. 3012/S. 2821, H.R. 496/S. 1466, H.R. 1875, S. 3103, S. 3134, S. 1254, S.
1027, H.R. 2378, H.Res. 934, H.Res. 987, and H.Res. 1124.
The balance on current account includes merchandise trade plus trade in services and unilateral
transfers. In 2009, the deficit on current account fell to $419.9 billion from $706.1 billion in 2008
and $726.6 billion in 2007. IHS Global Insight forecasts a higher deficit on current account for
2010, at $552.2 billion, and 2011, at $625.9 billion. In trade in advanced technology products, the
U.S. balance improved from a deficit of $61 billion in 2008 to $56 billion in 2009. In trade in
motor vehicles and parts, the $73.4 billion U.S. deficit in 2009 was mainly with Japan, Mexico,
and Germany.
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U.S. International Trade: Trends and Forecasts
Contents
Most Recent Developments......................................................................................................... 1
Trade in Goods...................................................................................................................... 2
Trade in Services................................................................................................................... 2
Trade in Goods and Services ................................................................................................. 3
International Trade and U.S. Trade Policy ................................................................................... 4
The Trade Deficit and the Dollar ................................................................................................. 7
Types of Trade Data .................................................................................................................. 11
U.S. Merchandise Trade Balance............................................................................................... 11
Current Account Balance........................................................................................................... 14
Forecasts................................................................................................................................... 17
U.S. Trade with Selected Nations .............................................................................................. 18
Advanced Technology, Transportation, and Energy.................................................................... 24
Some Common Perceptions ...................................................................................................... 29
Is the Trade Deficit at a Dangerous Level? .......................................................................... 30
Is Trade with China Merely Replacing That with Southeast Asia?........................................ 31
Trade Balances with Free Trade Agreement Nations ............................................................ 34
International Trade Statistics Web Resources............................................................................. 35
Figures
Figure 1. Monthly U.S. Balances of Trade in Goods and Services, 2008, 2009, and 2010............. 4
Figure 2. Month-End Trade-Weighted U.S. Dollar Against Broad, Major Currencies, and
Other Important Trading Partner Indices, January 2000-January 2010 ...................................... 8
Figure 3. The Exchange Value of the Chinese Renminbi, Japanese Yen, British Pound,
EU Euro, and Canadian Dollar ................................................................................................. 9
Figure 4. U.S. Merchandise Exports, Imports, and Trade Balance .............................................. 12
Figure 5. Annual Growth in U.S. Merchandise Exports and Imports, 1982-2009....................... 14
Figure 6. U.S. Current Account and Merchandise Trade Balances.............................................. 15
Figure 7. U.S. Merchandise Trade Balances With Selected Nations, 2009.................................. 18
Figure 8. 2009 U.S. Automotive Trade by Major Segment ......................................................... 27
Figure 9. The U.S. Current Account Deficit as a Percent of Gross Domestic Product,
1985-2011 (forecast) .............................................................................................................. 31
Figure 10. U.S. Balance of Merchandise Trade with FTA Partner Countries............................... 35
Tables
Table 1. U.S. Total Goods Trade With All Countries .................................................................... 2
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U.S. International Trade: Trends and Forecasts
Table 2. U.S. Merchandise Exports, Imports, and Trade Balances on Census and Balance
of Payments Bases ................................................................................................................. 13
Table 3. U.S. Current Account Balances .................................................................................... 16
Table 4. U.S. Merchandise and Current Account Trade, 2004 to 2011 (Forecast)....................... 17
Table 5. U.S. Merchandise Trade Balances with Selected Nations and Groups ........................... 19
Table 6. Top U.S. Merchandise Deficit Trading Partners, 2009 .................................................. 20
Table 7. Top U.S. Trading Partners Ranked by Total Merchandise Trade in 2009 ....................... 22
Table 8. U.S. Current Account Balances With Selected U.S. Trading Partners, 2009 .................. 23
Table 9. U.S. Trade in Advanced Technology Products .............................................................. 24
Table 10. U.S. Trade in Motor Vehicles (Passenger Cars, Trucks, and Buses) and Parts by
Selected Countries, 2009........................................................................................................ 26
Table 11. U.S. Energy Trade With the World, 2007-2009 ........................................................... 28
Table 12. U.S. Imports of Crude Oil from Selected Countries, 2009........................................... 28
Table 13. U.S. Imports of Woven Apparel.................................................................................. 32
Table 14. Changes in U.S. Merchandise Trade Balances With Selected Countries and
Groups, 2007, 2008, and 2009................................................................................................ 33
Contacts
Author Contact Information ...................................................................................................... 36
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U.S. International Trade: Trends and Forecasts
Most Recent Developments
World trade volume will rebound by 9.5% this year after plunging 12.2% in 2009 due to the
global recession, according to a WTO report published on March 26, 2010. While exports from
advanced economies are expected to grow by 7.5%, those from the rest of the world should
increase by 11%. This forecast assumes global growth of 2.9% and stability in oil prices and
exchange rates. Despite the increased forecast, the 2010 recovery will not be enough to offset last
year’s losses, which represented the largest slump in trade since the Second World War.
According to the study, if trade continues to expand at its current pace, traded volumes will not
surpass the 2008 peak until 2011. (Oxford Analytica Executive Report 3/29/10). Against this
background in world trade, how did the United States fare in trade in 2009?
As the global financial crisis worsened and the United States and other countries dropped into
recession, the declining U.S. trade deficit contributed positively to the growth in the U.S.
economy. The U.S. recession would have been worse without the shrinking U.S. trade deficit. In
2009, the recession apparently bottomed out in North America, Japan, and Europe. China
continues to exhibit strong growth. Given the simultaneous economic recession across major
nations of the world, exporting countries were not able to rely on increased foreign demand to
make up for slack demand at home. There was little prospect that any country could export their
way out of recession. One exception, however, was South Korea, a country that maintained its
exports by depreciating its currency nearly 50% against the U.S. dollar. While U.S. imports
declined in 2009, companies competing with imports continued to face diminishing demand as
the domestic economy stagnated. These conditions created pressure for political forces to protect
domestic industry from imports worldwide.
In 2009, the U.S. deficit in merchandise trade dropped by about one-third (relative to 2008) to
$517 billion as the U.S. recession caused imports to decline faster than exports. Total U.S. trade
(exports plus imports of goods and services) also fell by about 23%. In 2009, U.S. exports to the
world declined by 18%, while U.S. imports from the world declined 26% relative to the same
time period’s 2008 values.
In 2009, imports of energy-related petroleum products fell by about one-half as moderating prices
for crude oil and weakening domestic demand for gasoline and other petroleum products cut into
the need for imports. For 2009, imports of energy products remain the U.S. top import
commodity, despite a decline in total import value of 45% relative to the same time period in
2008.
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Trade in Goods
Table 1. U.S. Total Goods Trade With All Countries
In Millions of Current U.S. Dollars
% Change
% Change
Description 2007 2008 2009
2008/2007
2009/2008
US Goods Exports
1,138,384
1,276,994
1,045,543
2.2
-18.1
US Goods Imports
1,969,375
2,117,245
1,562,588
7.5
-26.2
US Goods Balance
-830,992
-840,252
-517,045
-1.1
38.5
Source: U.S. Department of Commerce, Bureau of Economic Analysis and CRS.
Note: Balance of Payments basis.
In 2009, the trade deficit in goods reached $517.0 billion on a balance of payments (BoP) basis,
less than the $840.3 billion in 2008 and less than the $831.0 billion in 2007. In Figure 4, the trade
balance appears roughly the same from 2005 through 2008, with a pronounced lessening in 2009.
The 2009 deficit on merchandise trade with China was $227 billion (Census basis), with the
European Union was $60.5 billion, with Canada was $20.2 billion, with Japan was $44.8 billion,
with Mexico was $47.5 billion, and the Asian Newly Industrialized Countries (Hong Kong, South
Korea, Singapore, and Taiwan) switched from deficits in 2004 through 2007 to a 2009 surplus of
$3.6 billion. Imports of goods of $1,562.6 billion decreased by $554.7 billion (26.2%) over
2008. Decreases in imports by sector were: crude oil down $159.1 billion, capital goods except
automotive down $84.5 billion, automotive vehicles and parts down $73.8 billion, and industrial
supplies and materials down $318.4 billion. Exports of goods of $1,045.5 billion fell by $231.5
billion (18.1%), particularly in industrial supplies, down $91.7 billion, capital goods except
automotive down $67.3 billion, automotive vehicles and parts down $39.8 billion, and consumer
goods down $11.3 billion. U.S. exports and imports of goods began to decline in August 2008.
This trend continued until exports of goods began to increase in May 2009 and imports
began to increase in June. Monthly exports had dropped from $114.7 billion in August 2008
to $80.0 billion in April 2009. Similarly, monthly U.S. goods imports dropped from $186.8
billion in August 2008 to $119.2 billion in May 2009. This trend then reversed, with both
exports and imports increasing with temporary downward fluctuations through latest data
of March 2010.
Trade in Services
In 2009, total annual imports of services of $370.8 billion and exports of $509.2 billion yielded a
surplus in U.S. services trade of $138.4 billion. The U.S. service industries, particularly, financial
services, tourism, shipping, and insurance, tend to compete well in international markets. U.S.
services exports peaked in June, 2008, at $47.2 billion. U.S. services imports likewise peaked
in August 2008 at $35.7 billion. Both flows declined through March 2009 and since have
been mainly increasing with exports reaching $45.2 billion and imports reaching $32.7
billion in March 2010.
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U.S. International Trade: Trends and Forecasts
Trade in Goods and Services
Since the United States runs a surplus in trade in services, the combined deficit on goods and
services is lower than the deficit on goods alone. In 2009, exports of goods and services of
$1,554.7 and imports of $1,933.3 resulted in a deficit of -$378.6 billion, down from the -$695.9
billion in 2008 and -$701.4 billion in 2007.
For 2009, the annual trade deficit on goods and services amounted to approximately 2.6% of U.S.
gross domestic product (GDP, $14,258 billion in 2009), down from 4.8% in 2008, 5.1% in 2007
and 5.8% 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. Given the “safe haven” effect (investors seeking a safe
investment) associated with U.S. Treasury securities, however, as the global financial crisis
worsened, foreign investors flocked to U.S. securities. As a result, U.S. interest rates remained
relatively low, and in combination with the declining U.S. trade deficit have worked to allay
concerns over the ability of the United States to finance the excess of imports over exports.
Toward the end of 2009, however, investors slowed their buying of U.S. securities causing the
dollar to weaken and raising some concern that U.S. interest rates may rise.
Figure 1 shows U.S. trade balances in goods and in services by month, for 2008, 2009, and
beginning 2010. The 2008 monthly services balance began at $12.4 billion, rose through midyear,
then dropped to $11.3 billion in December. Monthly services balances for 2009 and thus far in
2010 have averaged between $11 and $12 billion. Total 2009 annual imports of services of $370.8
billion and exports of $509.2 billion yielded a surplus in U.S. services trade of $138.4 billion.1
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.
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.
2 See, for example, CRS Report R41145, The Future of U.S. Trade Policy: An Analysis of Issues and Options for the
111th Congress , by William H. Cooper; CRS Report RL33743, Trade Promotion Authority (TPA): Issues, Options, and
Prospects for Renewal, by J. F. Hornbeck and William H. Cooper; CRS Report RL31356, Free Trade Agreements:
Impact on U.S. Trade and Implications for U.S. Trade Policy, by William H. Cooper; CRS Report RL31832, The
Export Administration Act: Evolution, Provisions, and Debate, by Ian F. Fergusson, CRS Report RL33550, Trade
Remedy Legislation: Applying Countervailing Action to Nonmarket Economy Countries, by Vivian C. Jones, CRS
Report RS20088, Dispute Settlement in the World Trade Organization (WTO): An Overview, by Jeanne J. Grimmett, or
CRS Report RL33274, Financing the U.S. Trade Deficit, by James K. Jackson.
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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Figure 1. Monthly U.S. Balances of Trade in Goods and Services, 2008, 2009, and 2010
(in Current Billion Dollars)
$Billions
20
Serv ices 2009
&
&
&
&
&
&
&
&
&
&
&
&
Serv ices 2010
0
-20
%
-40
%
%
%
%
%
%
%
%
%
%
%
$
$
-60
Goods 2009
Goods 2010
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.
Note: Balance of Payments basis.
International Trade and U.S. Trade Policy
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. Although the United States is
one of the three largest exporters in the world (China and Germany are the other two), U.S. sales
abroad are overshadowed by the huge demand by Americans for imported products. Since 1976,
the United States has incurred continual merchandise trade deficits with annual amounts
increasing steadily until the plateau of years 2005 through 2008. Then in 2009 the U.S. trade
deficit declined roughly 38% (see Figure 4).
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, prices will rise, financial markets will be disrupted, and the economic well being of the
population will be reduced. On the strategic level, trade ties often lead to a deepening of bilateral
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U.S. International Trade: Trends and Forecasts
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.
In the recent financial crisis, countries coordinated their stimulus packages but they also were
loath to seek outside assistance, particularly from the International Monetary Fund. As a result,
countries often had to rescue their own businesses and economies even if such actions came at the
expense of other countries. In cases, this involved seeking national advantage by either protecting
domestic industries through restricting imports or promoting exports.
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. At the household level, rising trade deficits and free trade agreements often are
associated with the loss of jobs, an issue of high concern to the American public. For example, in
November 2009, the Pew Research Center found that 85% of the respondents in a survey said that
protecting jobs should be a top foreign policy priority and that economic issues were the greatest
international problem confronting the United States, followed closely by the wars in Afghanistan
and Iraq. As for free trade agreements, 43% said that they were good for the country while 32%
said that they were bad. In the Pew survey, 53% thought free trade agreements lead to job losses,
49% to lower wages, and 42% to slower economic growth.5
The Obama Administration did not articulate its policy on trade until March 2010 arguably
because of the urgency of dealing with the global financial crisis and the push for health care
legislation. Until then, most of U.S. trade policy relied on existing mechanisms to protect
American industries from unfair trade and from surges in imports (increased tariffs on imports of
tires from China) and on taking no action on pending free-trade agreements with Columbia,
Panama, and South Korea. In March 2010, following the passage of the health care legislation,
the Administration began to turn its attention to other pressing issues, including international
trade policy.
On March 3, 2010, the President sent his trade policy agenda to Congress. It included the
following:
• Support and strengthen a rules-based trading system. (support an ambitious and
balanced Doha agreement that liberalizes agriculture, goods and services)
• Enforce rights in the rules-based trading system. (strengthen monitoring and
enforcement, use the WTO dispute settlement process, increase focus on nontariff
barriers, and enforce labor and environmental rights in trade agreements)
• Enhance U.S. growth, job creation and innovation. (emphasize relations with
emerging markets and key trade partners, pursue regional engagement,
particularly negotiation of a Trans-Pacific Partnership Agreement)
• Work to resolve outstanding issues with pending free trade agreements (FTAs)
and build on existing agreements. (resolve issues with and implement pending
FTAs with Panama, Colombia, and South Korea and strengthen relationships
5 Pew Research Center for the People and the Press. “U.S. Seen as Less Important, China as More Powerful,
Isolationist Sentiment Surges to Four-Decade High,” Survey Reports, December 3, 2009.
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U.S. International Trade: Trends and Forecasts
with current trading partners such as Canada, Mexico, Japan, and the European
Union)
• Facilitate progress on national energy and environmental goals.
• Foster stronger partnerships with developing and poor nations.
The Administration also is exploring the possibility of negotiating a multilateral agreement
providing for free trade in environmental goods and for removing non-tariff barriers to
environmentally friendly services. The Administration’s Trade Policy Agenda also includes a
National Export Initiative that aims to double U.S. exports over the next five years. Its particular
focus is on assisting small- and medium-sized enterprises to export more.
In Congress, Members have expressed both support and opposition to the three pending free trade
agreements. The specific points cited in opposition to the FTAs include anti-labor activities in
Columbia, potential tax havens in Panama, and the protected automobile market in South Korea.
However, in the background seems to be a general reluctance to approve any FTAs at all unless
they are seen to create jobs and meet certain labor and environmental standards. On April 20,
2010, Senators Max Baucus and Charles E. Grassley of the Senate Finance Committee sent a
letter to the President urging effort to resolve issues relating to South Korean imports of beef and
automobiles in order to win broad approval of the Korea-U.S. FTA. On March 10, 2010, Senators
John Kerry and Dick Lugar of the Senate Foreign Relations Committee also sent a letter to the
President urging the Administration to settle the issues holding up the Korea-U.S. FTA.6 Other
trade policy issues in Congress have been China’s undervalued currency, trade enforcement,
consumer safety for imported goods, and environmental protection as it relates to trade.
Numerous bills in Congress address issues related to trade. For example:
• The American Recovery and Reinvestment Act of 2009 (H.R. 1, P.L. 111-5)
contained a “Buy America” provision.
• H.R. 4284, a bill to extend the Generalized System of Preferences and the
Andean Trade Preference passed the Congress in December 2009.
• The Trade Act of 2009 (H.R. 3012/S. 2821) would require biennial reviews of
certain free trade agreements and would provide that implementing bills of new
trade agreements not be subject to expedited consideration unless such
agreements included certain standards with respect to aspects such as labor;
human rights; the environment and public safety; and food and product safety.
The bill also would require the President to submit a plan to Congress for the
renegotiation of existing trade agreements to bring them into compliance with
such standards.
• The Trade Enforcement Act of 2009 (H.R. 496/S. 1466) would require the United
States Trade Representative to: (1) review U.S. trade expansion priorities; and (2)
report to Congress on priority foreign country practices which if eliminated will
have the most potential to increase U.S. exports. It also would establish the
Office of the Congressional Trade Enforcer and would require the USTR to (1)
6 Ian Swanson, Baucus, Grassley want action on South Korea trade deal, The Hill’s Blog Briefing Room, April 20,
2010. Kerry, Lugar Urge Administration To Move Forward On The U.S.-Korean Trade Agreement , Senate Foreign
Relations Committee Press Release, May 10, 2010.
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identify priority foreign countries that maintain technical barriers to trade, or
sanitary or phytosanitary measures, that deny market access to U.S. products; and
(2) initiate an investigation of such trade barriers to determine what trade action,
if any, must be taken to remedy such barriers. It also would apply countervailing
duty provisions to nonmarket economy countries.
• The End the Trade Deficit Act (H.R. 1875) would establish an Emergency
Commission to End the Trade Deficit.
• The Small Business Job Creation Act of 2010 (S. 3103) would direct
Administrator of the Small Business Administration to take certain measures to
promote exports.
• Several bills address the issue of misaligned currencies. They include S. 3134, S.
1254, S. 1027, and H.R. 2378.
• Several bills address issues regarding the pending free trade agreements with
South Korea, Columbia, and Panama. They include H.Res. 934, H.Res. 987, and
H.Res. 1124.
The Trade Deficit and the Dollar
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;
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.
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.7
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 2008, merchandise exports
7 For further information on trade deficits and the macroeconomy, see CRS Report RL33274, Financing the U.S. Trade
Deficit, by James K. Jackson, and CRS Report RL33186, Is the U.S. Current Account Deficit Sustainable?, by Marc
Labonte.
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accounted for about 9% of GDP, compared with 5.9% in 1990. In 2009, as trade deficits declined,
they provided some help to the ailing economy. If they rise in 2010, as forecasted, they will
provide a drag on the economic recovery.
Many economists fear that the rising U.S. trade and current account8 deficits could lead to a large
drop in the value of the U.S. dollar. The current account deficit, while decreasing from 6.0% of
GDP in 2006 to 5.2% of GDP in 2007, and 4.9% in 2008, and 2.9% in 2009, 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 2009, the dollar has lost some value, partly
due to the Federal Reserve’s lowering of interest rates.
Figure 2. Month-End Trade-Weighted U.S. Dollar Against Broad, Major Currencies,
and Other Important Trading Partner Indices, January 2000-January 2010
160
Other Important Trading
Partners
140
120
100
80
Major Currencies
60
Broad
40
20
0
Jan -00
Jul -00
J
an-01
Jul-01
J
an-02
Jul-02
J
an-03
Jul-03
J
an-04
Jul-04
J
an-05
Jul-05
J
an-06
Jul-06
J
an-07
Jul-07
Ja
n -08
Jul -08
Ja
n -09
Jul -09
Ja
n -10
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.
8 U.S. trade in goods and services plus net flows of investment income and remittances.
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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. The global financial crisis first worked to
strengthen the dollar vis-à-vis the EU euro, UK pound, Canadian dollar, and many currencies of
developing nations, however, after mid-2009, the dollar weakened and then began to strengthen
again. The Japanese yen has appreciated considerably as some investors have invested in yen-
denominated assets instead of those denominated in dollars. During the global financial crisis, the
Chinese government has kept the renminbi essentially pegged to the dollar, although it had
appreciated somewhat prior to the crisis.
Figure 3. The Exchange Value of the Chinese Renminbi, Japanese Yen, British Pound,
EU Euro, and Canadian Dollar
PACIFIC Exchange Rate Service
Source: © 2010 by Prof. Werner Antweiler, University of British Columbia, Vancouver BC, Canada.
Permission is granted to reproduce the above image provided that the source and copyright are acknowledged.
Notes: Time period shown in diagram: July 2008 – March 2010.
Currently, foreign investment in dollar assets along with purchases of securities by investors
seeking a safe haven as well as from central banks of countries such as China have bolstered the
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U.S. International Trade: Trends and Forecasts
value of the dollar. China’s central bank has intervened in currency markets to keep its exchange
rate relatively stable. Japan claims not to have intervened in currency markets since spring of
2004. This intervention adds to the foreign currency reserves held by these countries. As of
March 2010, Japan’s central bank held $1,042.7 billion in foreign currency reserves,9 and the
Bank of China held $2,447 billion.10 In U.S. Treasury securities, as of February 2010, Japan held
$768.5 billion and China $877.5 billion.11 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, in March 2010 the renminbi was trading at 6.8 per
dollar. Beijing apparently has indicated that it would take some action on the renminbi prior to the
G-20 meetings in November 2010 in Seoul, Korea.
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. 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
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.
9 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/.
10 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/.
11 Statistics on foreign holdings of U.S. Treasury securities are available at http://www.treasury.gov/tic/mfh.txt. For
further information, see CRS Report RS22331, Foreign Holdings of Federal Debt, by Justin Murray and Marc Labonte.
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 and CRS Report
RS21951, Financing the U.S. Trade Deficit: Role of Foreign Governments, by Marc Labonte.
14 For details, see CRS Report RS20826, Structure and Functions of the Federal Reserve System, by Pauline Smale.
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In the 111th Congress, legislation directed at the trade deficit has been 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. Legislation is tracked in other CRS reports dealing with trade.
Types of Trade Data
The U.S. government compiles trade data in four different ways. The data on goods trade are first
compiled on a Census basis. Bilateral trade with countries 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.
U.S. Merchandise Trade Balance
The merchandise (goods) trade balance is the most widely known and frequently used indicator of
U.S. international economic activity (see Figure 4). In 2009, total U.S. merchandise trade
amounted to $2,614.8 billion, a 22.9% decrease from $3,391.1 billion in 2008. Merchandise
exports in 2009 totaled $1,057 billion, while imports reached $1,558 billion (Census basis). The
U.S. merchandise trade deficit fell massively from -$816 billion in 2008 to -$501 billion in 2009.
The merchandise deficit increased in double-digit rates by 23% in 2004 and 18% in 2005. The
deficit increase slowed in 2006, by 9.2%, then fractionally in 2007, by 0.9%, before its decrease
in 2009 by 38.5%.
15 For legislation related to trade with China and the Chinese currency, see CRS Report RL33536, China-U.S. Trade
Issues, by Wayne M. Morrison and CRS Report RL32165, China’s Currency: Economic Issues and Options for U.S.
Trade Policy, by Wayne M. Morrison and Marc Labonte.
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Figure 4. U.S. Merchandise Exports, Imports, and Trade Balance
$ Billions
2500
2250
2000
U.S. Exports
1750
1500
U.S. Imports
1250
1000
750
500
250
0
-250
-500
Trade Balance
-750
-1000
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
Year
Source: CRS with Census basis data from U.S. Bureau of Economic Analysis http://www.bea.gov/.
U.S. merchandise exports (as shown in Table 2 and Figure 5), decreased in 2001 and 2002 in
response to the global slowdown, but generally have been increasing each year. As shown in
Figure 5, the growth of imports has also been steady, although they too fell by 6.4% 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. Growth in exports and imports slowed in 2007 with exports rising by
12.3% and imports by 5.7%. Likewise in 2008, exports grew faster than imports (12.4% vs 7.3%),
but the trade deficit still increased. This is because U.S. imports are about 63% greater than U.S.
exports, so exports must grow about 63% faster than imports just for the deficit to remain
constant. Then in 2009, with the full force of the financial crisis, exports decreased slower than
imports (-17.9% vs -25.9%).
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Table 2. U.S. Merchandise Exports, Imports, and Trade Balances on Census and
Balance of Payments Bases
In Billions of Current U.S. dollars
Census basis
Balance of Payments basis
Exports
Imports
Trade
Exports
Imports
Trade
Year
(f.a.s.)a
(customs)b
Balance
(f.a.s.) a
(customs)b
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 -180.5 678.4 876.8 -198.4
1998 682.1 911.9 -229.8 670.4 918.6 -248.2
1999 695.8 1,024.6 -328.8 684.0 1031.8 -347.8
2000 781.9 1,218.0 -436.1 772.0 1226.7 -454.7
2001 729.1 1,141.0 -411.9 718.7 1148.6 -429.9
2002 693.1 1,161.4 -468.3 685.2 1168.0 -482.8
2003 724.8 1,257.1 -532.3 715.8 1264.9 -549.1
2004 818.9 1,469.7 -654.8 806.2 1478.0 -671.8
2005 901.1 1,673.5 -772.4 892.3 1683.2 -790.9
2006
1,026.0 1,853.9
-828.0 1015.8
1863.1 -847.3
2007
1,148.2 1,957.0
-808.8 1138.4
1969.4 -831.0
2008
1,287.4 2,103.6
-816.2 1277.0
2117.2 -840.3
2009 1,056.8 1,558.1 -501.3 1,045.5 1,562.6 -517.0
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
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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.
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.
Figure 5. Annual Growth in U.S. Merchandise Exports and Imports,
1982-2009
P ercent
30
25
Export
Import
20
Growth
Growth
15
10
5
0
-5
-10
-15
-20
-25
-30
82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
Year
Source: Underlying data from U.S. Department of Commerce.
Current Account Balance
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 Table 2). 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.
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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 are announced several months later than those on trade in goods and
services.
Figure 6. U.S. Current Account and Merchandise Trade Balances
In Billions of Current U.S. Dollars
200
Actual
Forecast
0
-200
-400
-600 Goods Trade
-800
Current Account
-1000
97
98
99 2000 01
02
03
04
05
06
07
08
09
10
11
12
Year
Sources: CRS with data from U.S. Bureau of Economic Analysis, U.S. International Transactions Account.
Forecasts from IHS Global Insight.
Table 3 summarizes the components of the U.S. current account. In 2009, the U.S. deficit on
current account decreased to $419.9 billion from $706.1 billion in 2008. The 2009 deficit on
current account amounted to 2.9 % of GDP, down from 4.9% in 2008. Both these data remain
below the 5% level of caution used by the International Monetary Fund. Since the dollar is used
as an international reserve currency, 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 and 2008 before the large rise in 2009.
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Table 3. U.S. Current Account Balances
In Billions of Current U.S. 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 9.9 2.9
1992 -96.9 57.7 24.2 -35.1 -50.1
1993 -132.5
62.1 25.3 -39.8 -84.8
1994 -165.8
67.3 17.1 -40.3 -121.6
1995 -174.2
77.8 20.9 -38.1 -113.6
1996 -191.0
86.9 22.3 -43.0 -124.8
1997 -198.4
90.2 12.6 -45.1 -140.7
1998 -248.2
82.1 4.3 -53.2 -215.1
1999 -347.8
82.7 13.9 -50.4 -301.6
2000 -454.7
74.9 21.1 -58.6 -417.4
2001 -429.5
64.4 31.7 -51.3 -384.7
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 -790.9
75.6 72.4 -105.8 -748.7
2006 -847.3
86.9 48.1 -91.3 -803.5
2007 -831.0 129.6 90.8 -116.0 -726.6
2008 -840.3 144.3 118.2 -128.4 -706.1
2009 -517.0 138.4 89.0 -130.2 -419.9
Source: U.S. Bureau of Economic Analysis, U.S. International Transactions.
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.
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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 surpluses of $86.9 billion in 2006, $129.6 billion in 2007, $144.3 billion in 2008 and
$134.4 billion in 2009. Since Americans are such large investors in foreign economies, the United
States traditionally also has a surplus in its investment income ($89.0 billion in 2009), but the
deficit in unilateral transfers (primarily dollars sent abroad by foreign workers and recent
immigrants) totaled $130.2 billion in 2009. Unilateral transfers have now reached more than
triple the level of the late 1980s.
Forecasts
According to IHS 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 6). 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,
2004 to 2011 (Forecast)
In Billions of Current U.S. Dollars
2004 2005 2006 2007 2008 2009 2010F 2011F
Merchandise Trade
Exports
Actual
818.3 892.3 1015.8 1138.4 1277.0 1045.5
—
—
Forecasted — — — — — —
1,216.0
1,333.4
Imports
Actual
1499.5 1683.2 1863.1 1969.4 2,117.2 1562.6
—
—
Forecasted — — — — — —
1,838.3
2,032.9
Trade Balance
Actual
-669.6 -790.9 -847.3 -831.0 -840.3 -517.0
—
—
Forecasted — — — — — —
-622.3
-699.5
Services Trade Balance
Actual
61.8 75.6 86.9 129.6 144.3 138.4 —
—
Forecasted — — — — — —
145.7
157.1
Current Account Balance
Actual
-625.0 -748.7 -803.5 -726.6 -706.1 -419.9
—
—
Forecasted — — — — — —
-552.2
-625.9
Sources: (BoP basis). U.S. Bureau of Economic Analysis; and IHS Global Insight (searched March 2010).
Note: “F” means forecast.
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U.S. Trade with Selected Nations
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 7 and Table 4 and Table 5 show U.S. trade balances with selected nations.
Figure 7. U.S. Merchandise Trade Balances With Selected Nations, 2009
Country
China
-227
Mexico
-48
Japan
-45
Germany
-28
Ireland
-21
Canada
-20
V enezuela
-19
Nigeria
-15
Italy
Deficit
-14
Malaysia
-13
Russia
-13
Thailand
-12
Saudi Arabia
-11
Korea
-11
Taiw an
-10
Algeria
-10
Vietnam
-9
France
-8
Sw itzerland
1
Egypt
3
Chile
3
Brazil
6
Singapore
Surplus
7
Belgium
8
Australia
12
Netherlands
16
Hong Kong
18
-300
-250
-200
-150
-100
-50
0
50
$ Billions
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, Mexico, Japan, Germany,
Ireland, and Canada. Trade with the oil exporting countries, particularly Venezuela, Nigeria, and
Saudi Arabia, also is in deficit. U.S. trade surpluses occur in trade with Hong Kong, the
Netherlands, 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, then $268 billion in 2008, and $227 billion in 2009, the negative net balance
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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
almost five 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
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 the trade
surplus with the United States at $102 billion in 2008 that China reported was less than half the
U.S. deficit with China of $268 billion reported by the United States. For 2009, China reported a
trade surplus with the United States of $143.3 billion while the U.S. figure was $226.8 billion.
Table 5. U.S. Merchandise Trade Balances with Selected Nations and Groups
In Millions of Current U.S. Dollars, Census basis
Country
2004 2005 2006 2007 2008 2009
Total
-654,830 -772,373 -827,971 -808,763 -816,199 -501,190
North America
-111,650
-128,347
-136,313
-142,964
-143,063
-67,750
Canada
-66,480 -78,486 -71,782 -68,169 -78,342 -20,211
Mexico
-45,170 -49,861 -64,531 -74,796 -64,722 -47,539
European Union 27
-111,392
-124,395
-119,325
-110,243
-95,807
-60,543
United
Kingdom
-10,372 -12,465 -8,103 -6,876 -4,988 -1,772
Germany
-45,850 -50,567 -47,923 -44,744 -42,991 -27,954
France
-10,688 -11,583 -13,528 -14,877 -15,209 -7,512
Italy
-17,413 -19,485 -20,109 -20,878 -20,674 -14,184
Netherlands
11,689 11,606 13,617 14,434 18,597 16,244
Russia
-8,930 -11,344 -15,128 -12,031 -17,448 -12,838
Japan
-76,237 -83,323 -89,722 -84,304 -74,120 -44,769
China
-162,254 -202,278 -234,101 -258,506 -268,040 -226,826
Newly Industrialized
-22,479 -16,606 -13,234 -5,509 2,184 3,634
Countries (NICS)
Singapore 4,027
5,356
6,057
7,225
11,969
6,620
Hong
Kong
6,513 7,459 9,795 12,876 15,015 17,552
16 For details and policy discussion, see CRS Report RL33536, China-U.S. Trade Issues, by Wayne M. Morrison.
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Country
2004 2005 2006 2007 2008 2009
Taiwan
-13,038 -13,211 -15,502 -12,449 -11,400 -9,942
S.
Korea
-19,981 -16,210 -13,584 -13,161 -13,400 -10,595
South/Central
-37,268 -50,549 -45,296 -28,035 -23,034 1,721
American Countries
Argentina
-357 -462 797 1,369 1,714 1,670
Brazil -7,273
-9,064
-7,480
-1,472
1,846
6,101
Colombia -2,751
-3,387
-2,557
-876
-1,656
-1,862
OPEC
-78,391 -104,650 -121,408 -128,769 -177,699 -61,849
Venezuela
-20,153 -27,557 -28,131 -29,709 -38,814 -18,735
Saudi
Arabia
-15,702 -20,387 -24,049 -25,230 -42,263 -11,242
Nigeria
-14,694 -22,620 -25,630 -29,992 -33,966 -15,470
Source: United States Census Bureau, Foreign Trade Division. For other countries and further detail, see U.S.
International Trade in Goods and Services, December 2009, FT-900 (09-12), released Feb. 10, 2010.
Table 6 lists the U.S. top deficit trading partners in merchandise trade, on a Census basis, with
U.S. export and U.S. import data for additional insight. In 2000, China not only overtook Japan as
the top U.S. deficit trading partner, but its continuing growth in annual trade deficits since 2000
has been stark. In 2009 the U.S. trade deficit with China declined $41.2 billion from its 2008
level, an improvement in U.S. terms, of 15%. After, China, the next highest deficit trading
partners are Mexico, Japan, Germany, Ireland and Canada.
Table 6. Top U.S. Merchandise Deficit Trading Partners, 2009
In Millions of Current U.S. Dollars and percentage change from 2008 to 2009)
Rank
Country
U.S. Balance % Change U.S. Exports % Change U.S. Imports % Change
0
*World* -500,944 -38.6 1,056,932 -17.9 1,557,876 -25.9
1 China
-226,826
-15.4
69,576
-0.2
296,402
-12.2
2
Mexico
-47,539 -26.5 128,998 -14.7 176,537 -18.2
3
Japan
-44,769 -39.6 51,180 -21.4 95,949 -31.1
4
Germany -27,954 -35.0 43,299 -20.6 71,253 -26.9
5 Ireland
-20,550
-13.4
7,516
-1.2
28,066
-10.5
6
Canada
-20,183 -74.2 204,728 -21.6 224,911 -33.8
7 Venezuela
-18,735
-51.7
9,360
-25.8
28,094
-45.4
8 Nigeria
-15,470
-54.5
3,658
-10.8
19,128
-49.8
9
Italy
-14,184 -31.4 12,233 -20.9 26,416 -26.9
10
Malaysia -12,877 -27.6 10,401 -19.7 23,279 -24.3
11 Russia
-12,838
-26.4
5,383
-42.3
18,221
-32
12 Thailand
-12,164
-15.9
6,921
-23.7
19,085
-18.9
13
Saudi
Arabia
-11,242 -73.4 10,804 -13.5 22,046 -59.7
14
Korea,
South
-10,595 -20.9 28,640 -17.4 39,235 -18.4
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Rank
Country
U.S. Balance % Change U.S. Exports % Change U.S. Imports % Change
15
Taiwan
-9,942 -12.8 18,432 -26.1 28,375 -21.9
16 Algeria
-9,609
-46.9
1,109
-10.8
10,718
-44.6
17 Vietnam
-9,182
-9.2
3,108
11.4
12,290
-4.7
18 Israel
-9,177
16.9
9,568
-34.0
18,745
-16.1
19
Angola -7,916
-53.1 1,423
-29.5 9,339
-50.6
20 Indonesia
-7,832
-22.9
5,106
-9.5
12,938
-18.1
21
France
-7,512 -50.6 26,522 -8.0 34,034 -22.7
22
Iraq
-7,488
-62.6 1,775
-14.3 9,263
-58
23
India
-4,714 -41.2 16,462 -6.9 21,176 -17.6
Source: CRS with U.S. Department of Commerce. U.S. International Trade in Goods and Services, FT-900 (09-
12).
Notes: Data are on a Census basis. Exports are valued f.a.s.; imports are valued Customs.
Total merchandise trade, exports plus imports, presents a clearer picture of countries’ overall
importance than any other flow. As seen in Table 7, in the past three years, Canada continued to
be America’s largest total merchandise trading partner. Canada was followed by China, Mexico,
Japan, Germany, the United Kingdom, Korea, and France. Brazil and the Netherlands switched
places from number 9 in 2008 to number 11 in 2009. Canada’s position as the historic largest
supplier of U.S. imports in 2006 and before, changed in 2007, as China surpassed Canada. In
2008 Canada regained the top spot in U.S. imports. In 2009, China regained first place in U.S.
imports. Canada is by far the top purchaser of U.S. exports with Mexico second. In 2007 China
passed Japan to become third. In 2009, Japan maintained the ranking of our fourth largest export
market.
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Table 7. Top U.S. Trading Partners Ranked by Total Merchandise Trade in 2009
In Millions of Current U.S. Dollars
Rank
Country
Total trade % Share U.S. Exports U.S. Imports U.S. Balance
0 World
2,614,808 100.00 1,056,932 1,557,876
-500,944
1 Canada
429,639 16.43 204,728
224,911
-20,183
2 China
365,978 14.00 69,576
296,402
-226,826
3 Mexico
305,535 11.68 128,998
176,537
-47,539
4 Japan
147,129
5.63 51,180
95,949
-44,769
5 Germany
114,552
4.38 43,299
71,253
-27,954
6 United
Kingdom 93,200
3.56 45,714
47,486
-1,772
7 Korea
South
67,875
2.60 28,640
39,235
-10,595
8 France
60,557
2.32 26,522
34,034
-7,512
9 Netherlands
48,450
1.85 32,347
16,103
16,244
10 Taiwan
46,807
1.79 18,432
28,375
-9,942
11 Brazil
46,249
1.77 26,175
20,074
6,101
12 Italy
38,649
1.48 12,233
26,416
-14,184
13 Singapore
37,937
1.45 22,279
15,659
6,620
14 India
37,639
1.44 16,462
21,176
-4,714
15 Venezuela
37,454
1.43
9,360
28,094
-18,735
16 Ireland
35,582
1.36
7,516
28,066
-20,550
17 Belgium
35,410
1.35 21,630
13,781
7,849
18 Malaysia
33,680
1.29 10,401
23,279
-12,877
19 Switzerland
33,532
1.28 17,499
16,033
1,466
20 Saudi
Arabia
32,850
1.26 10,804
22,046
-11,242
21 Israel
28,313
1.08
9,568
18,745
-9,177
22 Australia
27,612
1.06 19,597
8,015
11,583
23 Thailand
26,006
0.99
6,921
19,085
-12,164
24 Hong
Kong
24,685
0.94 21,119
3,567
17,552
25 Russia
23,604
0.90
5,383
18,221
-12,838
Source: U.S. Department of Commerce, Bureau of the Census via World Trade Atlas.
Notes: Total trade = exports + imports. Data are on a Census basis. Exports are valued f.a.s.; imports are
valued Customs.
Table 8 lists trade balances on goods, services, income, net unilateral transfers, and current
account 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 U.S. 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. For example,
Canada’s merchandise trade deficit of $21.6 became a current account surplus of $16.1 in 2009.
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Table 8. U.S. Current Account Balances With Selected U.S. Trading Partners, 2009
In Billions of Current U.S. Dollars
Merchandise
Investment
Net
Current
Trade
Services
Income
Unilateral
Account
Country
Balancea
Balanceb
Balancec
Transfersd
Balancee
All Countries
-517.0
138.4
89.0
-130.2
-419.9
Mexico
-50.7
8.2
-1.3
-13.3
-57.1
Canada
-21.6
20.9
18.8
-2.0
16.1
Asia and Pacific
-315.2
43.9
-36.0
-27.6
-334.9
China
-227.6
6.7
-40.4
-2.9
-263.7
Japan
-45.5
17.5
-21.0
-0.1
-49.0
S. Korea
-11.3
4.7
1.9
-0.9
-5.5
European
-63.5
41.7
22.4
-6.0
-5.4
Union
Germany
-28.4
-8.9
-6.2
-2.5
-46.0
United Kingdom
-1.6
14.7
-6.3
2.3
9.1
Latin America
-49.4
21.3
41.8
-31.3
-17.7
Middle East
-16.9
3.8
-4.6
-11.7
-29.5
Source: U.S. Bureau of Economic Analysis, International Transactions Account Data.
a. On a Balance of Payments 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 equal to the current account balance, may differ as a result of rounding.
Specific financial and trade flow data for the United States with other countries in 2009, the first
full year of the global financial crisis, were mainly at a lower level than previous years. For
comparison, we will present 2009 data with data for 2008 in parenthesis. Since Japan has invested
considerable amounts in securities, equities, and in factories in the United States, the United
States ran a deficit of $21 ($29.9 in 2008) billion in investment income with that country in 2009.
This more than offset the surplus of $17.5 ($15.5) billion in trade in services with Japan. As a
result, the current account deficit with Japan of $49 ($90.5 in 2008) billion in 2009 exceeded the
bilateral merchandise trade deficit of $45.5 ($75.1) billion. Likewise with China; the U.S. deficit
on investment income of $40.4 ($43.2 in 2008) billion far overshadowed the U.S. surplus of $6.7
($6.0) billion in services.
In 2009, a different situation existed with the European Union and Canada. The United States
earned a $22.4 ($49.7 in 2008) billion surplus in investment income with the EU in 2009, and the
U.S. surplus in services with the EU was $41.7 ($44.5) billion. These two flows offset a
merchandise deficit of $63.5 ($98.7 in 2008) billion to produce a U.S. current account deficit of -
$5.4 ($11.6) billion, lower than the 2006 current account deficit of $86.9 billion. From Canada
the United States received $18.8 ($24.4 in 2008) billion in investment income plus a surplus in
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U.S. International Trade: Trends and Forecasts
services trade of $20.9 ($21.3) billion. Hence, the current account surplus with Canada at $16.1
(deficit of $37.2 in 2008) billion was lower than the deficit of $21.6 ($81.0 in 2008) billion in
merchandise trade.
The rising deficit with many countries in investment income reflects the accumulating debt of the
United States relative to various countries and country groups of the world. Inflows of capital to
compensate for the U.S. trade deficit and a 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 2009, the
overall U.S. balance on investment income registered a surplus of $89 billion, lower than the
2008 balance on investment income of $118.2 billion. Imbalances in investment income with
certain countries have been growing and could become a problem in the future.
Advanced Technology, Transportation, and Energy
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 growth path, jumping to -$61.9 billion. In 2008, our
advanced technology deficit stabilized at -$61.1 billion, and in 2009 decreased to -$56.0 billion.
This deficit does not necessarily imply that 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.17
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
17 For information on the activities of multinational corporations in international trade, see CRS Report R40167,
Globalized Supply Chains and U.S. Policy, by Dick K. Nanto.
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Year
U.S. Exports U.S. Imports Trade Balance
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 264.9 326.8 -61.9
2008 270.1 331.2 -61.1
2009 244.7 300.7 -56.0
Source: U.S. Bureau of the Census. U.S. International Trade in Goods and Services. FT-900 (09-12), December 2009.
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 and Figure 8 provide data on trade in passenger cars, trucks, and transportation parts
with major automobile producing nations for 2009. This does not include foreign cars assembled
in the United States, or American cars assembled abroad. It is important to note that the
transportation sector in trade includes much more than passenger cars. The United States incurs
the largest deficits in this trade with Japan, Mexico, Germany, and South Korea. In 2009 the
United States had a surplus in automotive trade with Canada. The U.S. trade balance in motor
vehicles improved from a -$145 billion deficit in 2006 to a -$120.9 billion deficit in 2007, a -
$106.6 billion deficit in 2008 to a -$73.4 billion deficit in 2009.18 Figure 8 shows that while the
United States runs deficits in both cars and automotive parts, it runs a small surplus in trucks, and
exports profitably in all three segments.
18 For information on the automobile industry, see CRS 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 (Passenger Cars, Trucks, and Buses) and Parts
by Selected Countries, 2009
In millions of U.S. dollars
Country Total
Cars
Trucks Parts
U.S. Exports
TOTAL 84,844 27,507 14,503 42,834
Canada 37,439 8,383 9,177 19,879
Germany 6,042 4,705
66 1,270
Japan 1,162
289 38 836
Korea 492
161 16 314
Mexico 14,710 1,906 708 12,096
U.S. Imports
TOTAL 158,230 80,897 11,576 65,757
Canada 35,852 22,749 2,179 10,925
Germany 16,223 11,208
130
4,885
Japan 33,980
24,113 170 9,697
Korea 8,411
5,696 0 2,714
Mexico 38,117 10,049 8,708 19,361
U.S. Balance
TOTAL -73,386 -53,390 2,927 -22,923
Canada 1,587
-14,366 6,998 8,954
Germany -10,181 -6,503
-64
-3,615
Japan -32,818
-23,824 -132 -8,861
Korea -7,919
-5,535 16 -2,400
Mexico -23,407 -8,143 -8,000 -7,265
Source: U.S. Bureau of the Census, U.S. International Trade in Goods and Services, FT-900 (09-04).
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Figure 8. 2009 U.S. Automotive Trade by Major Segment
In millions of U.S. dollars
Source: U.S. Bureau of the Census. U.S. International Trade in goods and Services. FT-900 (09-12).
Table 11 shows exports, imports and balance of primary forms of energy by major country
source. The United States is the world’s top importer, and our top import is energy. Energy is also
our sixth ranked export commodity. In 2009, the United States imported 45% less and exported
29% less energy than in 2008. Our deficit in energy products declined by $199.6 billion.
Our major energy import product is crude oil, constituting 72% of our energy imports in 2009,
and, after subtracting exports of $1.8 billion, accounting for a trade deficit of -$192.6 billion.
Crude oil imports are so important to the U.S. economy that we show source countries of U.S.
2009 crude oil imports in Table 12. Roughly half came from the Organization of the Petroleum
Exporting Countries (OPEC) with Venezuela, Saudi Arabia, and Nigeria the predominant
suppliers. Imports from Iraq are recovering with $9.1 billion worth in 2009. Over 40% of U.S.
petroleum imports come from non-OPEC sources, primarily Canada and Mexico.19
Our major energy export product is refined products, such as gasoline and aviation fuel. Refined
petroleum products rank second to civilian aircraft, engines, and parts in top U.S. export products.
19 For policy discussion, see CRS Report RS22204, U.S. Trade Deficit and the Impact of Changing Oil Prices, by
James K. Jackson.
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Exports of refined petroleum products declined 30% in 2009. Major markets for our refined
products are Mexico, Netherlands, Canada, Singapore, and Chile.
Table 11. U.S. Energy Trade With the World, 2007-2009
Values in U.S. $ million
% Share
% Change
Description 2007 2008 2009 2007 2008 2009
2009/2008
Total
Energy
Exports 42,248.0 76,940.3 54,936.7
3.7
6.0
5.2
-28.6
Total
Energy
Imports 365,073.0 491,960.1 270,353.9
18.7
23.4
17.4
-45.1
Total Energy Balance
-322,825.0
-415,019.8
-215,417.2
Crude
Oil
Exports
1,114.5
2,296.1
1,816.3 2.6 3.0 3.3
-20.9
Crude
Oil
Imports
245,771.2
353,536.8
194,390.0 67.3 71.9 71.9 -45.0
Crude Oil Balance
-244,656.7
-351,240.7
-192,573.6
Refined
Exports 26,833.8
51,973.0
36,536.8 63.5 67.6 66.5 -29.7
Refined
Imports 74,116.6
87,115.9
52,598.8 20.3 17.7 19.5 -39.6
Refined Balance
-47,282.8
-35,142.9
-16,062.0
Nat. Gas Exports
4,726.6
6,500.0
4,804.9
11.2
8.5
8.8
-26.1
Nat. Gas Imports
36,752.3
40,452.1
17,641.5
10.1
8.2
6.5
-56.4
Nat. Gas Balance
-32,025.8
-33,952.1
-12,836.7
Electricity
Exports 991.9
1,263.9
575.2 2.4 1.6 1.1
-54.5
Electricity
Imports 2,968.9
3,644.1
2,070.6 0.8 0.7 0.8
-43.2
Electricity Balance
-1,977.0
-2,380.2
-1,495.4
Sources: U.S. Census Bureau via World Trade Atlas, using Harmonized Schedule (HS) 27 for total energy exports,
2709 for crude oil, 2710 for refined product, 2711 for natural gas, and 2716 for electricity.
Note: Census basis data.
Table 12. U.S. Imports of Crude Oil from Selected Countries, 2009
Value in U.S. $ million; Quantity in barrels
Country
Customs Value
Quantity
—World— $194,390.0
3,425,213,063
-OPEC-
$99,693.4 1,739,420,409
Canada $36,950.9
679,644,449
Venezuela
$24,618.6 445,146,506
Mexico $22,117.2
384,490,346
Saudi Arabia
$20,995.2 372,791,262
Nigeria
$18,287.9 281,541,013
Iraq
$9,128.0 165,152,962
Angola
$9,017.4 162,612,492
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U.S. International Trade: Trends and Forecasts
Country
Customs Value
Quantity
Algeria
$7,877.6 132,678,532
Brazil $5,800.9
106,419,942
Colombia $5,153.5
90,420,561
Russia $4,883.9
81,949,733
Kuwait
$3,653.9 65,162,933
Ecuador
$3,438.1 65,929,773
Congo $2,971.3
47,964,875
United Kingdom
$2,405.7
39,893,479
Equatorial Guinea
$2,376.5
41,157,962
Azerbaijan $1,955.0
31,146,530
Chad $1,838.6
34,174,673
Libya
$1,408.3 24,148,783
Norway $1,239.5
21,186,174
Gabon $1,139.3
21,010,313
Argentina $976.5
18,668,947
Trinidad & Tobago
$791.0
13,260,761
Oman $766.8
13,974,258
United Arab Emirates
$688.4 13,478,184
Vietnam $554.4
9,506,475
Kazakhstan $521.2
7,928,548
Thailand $446.1
8,102,554
Indonesia
$416.6 7,222,557
Congo, Dem. Rep.
$315.7
5,298,032
Peru $310.1
5,470,432
Australia $286.3
5,928,110
Guatemala $199.7
4,216,616
Egypt $177.9
2,972,342
Qatar
$163.2 3,555,412
China $109.4
1,962,738
Source: CRS with U.S. Dept. of Commerce, Bureau of the Census via World Trade Atlas.
Notes: Census basis data. Countries in bold are members of OPEC.
Some Common Perceptions
This section of the report addresses a few common perceptions about trade that can be validated
by data.
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Is the Trade Deficit at a Dangerous Level?
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. In the current global financial crisis, the dollar and U.S. Treasury securities are being
viewed as a safe haven for investors, so capital inflows into the United States have remained
sufficient to cover U.S. budget deficits and other government borrowing.
Figure 9 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 to zero in
1991 and rose to 5.3% in 2004 (exceeding the 5% level considered to warrant caution by the
International Monetary Fund). This ratio remained in the IMF caution zone from 2004 through
2007. The current account balance-GDP ratio fell below the IMF caution level for 2008 at 4.8%
and declined to 2.6% in 2009. However, forecasts for this ratio estimate a rise to 3.6% in 2010
and a continued rise to 4.3% in 2012, as the recession ends, imports rise, and the trade deficit
becomes more negative.
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Figure 9. The U.S. Current Account Deficit as a Percent
of Gross Domestic Product, 1985-2011 (forecast)
Percent
7
Actual
Forecast
5. 9 5.8
6
5.3
5.1
4.8
5
IMF Caution Lev el
4.7
4.3
4. 3
4. 2
4
3.8
4
3. 6
3.3 3.4
3. 2
2.8
3
2. 6
2.4
2.4
1.8
2
1. 7
1.6 1.7
1. 4
1. 5
1.3
0.8
1
0
0
85
87
89
91
93
95
97
99
01
03
05
07
09
11
Year
Sources: Data from U.S. Department of Commerce, Bureau of Economic Analysis. Forecasts by IHS Global
Insight, Inc.
Is Trade with China Merely Replacing That with Southeast Asia?
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 2006.20 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 2007.21 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. Table
13 shows that by 2009, Hong Kong, Taiwan, and South Korea have fallen below U.S. top ten
import source countries for woven apparel. China has expanded its percentage share of the market
for U.S. woven apparel from 2007’s 35.7% share to 2008’s 37.3% share to a 41.7% share in 2009
despite the global financial crisis and U.S. recession.
Table 13. U.S. Imports of Woven Apparel
Millions of U.S. Dollars and Percentages
Import Data
% Share
% Change
Rank
Country 2007 2008 2009 2007 2008 2009 2009/2008
0 World
37,599.1
35,719.3
30,928.4
100.0
100.0
100.0
-13.4
1
China 13,404.4
13,315.9
12,903.2 35.7 37.3 41.7 -3.1
2
Bangladesh
2,178.8
2,412.8
2,496.6 5.8 6.8 8.1 3.5
3 Mexico
2,813.3
2,532.9
2,208.1
7.5
7.1
7.1
-12.8
4 Vietnam
2,138.1
2,341.4
2,118.1
5.7
6.6
6.9
-9.5
5 Indonesia
2,235.7
2,020.8
1,732.7
6.0
5.7
5.6
-14.3
6 India
1,904.2
1,790.3
1,648.7
5.1
5.0
5.3
-7.9
7 Italy
1,211.1
1,139.9
741.3
3.2
3.2
2.4
-35.0
8 Sri
Lanka
877.7
816.3
691.7
2.3
2.3
2.2
-15.3
9 Cambodia
836.4
786.0
585.7
2.2
2.2
1.9
-25.5
10 Thailand
740.0
706.0
491.7
2.0
2.0
1.6
-30.4
11 Philippines
773.0
627.2
442.8
2.1
1.8
1.4
-29.4
23
Hong
Kong 943.4 680.5 141.0 2.51 1.91 0.46 -79.28
31
Taiwan 211.7
154.7 86.7 0.56 0.43 0.28
-43.98
41
Korea 142.2 84.3 40.4 0.38 0.24 0.13
-52.05
20 Calculations based on data from World Trade Atlas, using HS 62 for woven apparel.
21 The numbers are comparable for all Asian countries.
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Source: U.S. Bureau of the Census via World Trade Atlas.
Notes: Census basis data ranked by latest year (2009) source country.
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 remained in surplus through 2009. 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 $226.8 billion (45.3% of the
total) in 2009. 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 14
illustrates this complexity. Negative percentage change numbers, indicate a shrinking U.S.
merchandise trade deficit with that country or group. Positive percentage changes indicate
growing deficits.
Table 14. Changes in U.S. Merchandise Trade Balances With
Selected Countries and Groups, 2007, 2008, and 2009
Please Insert Appropriate Title
% Chg
% Chg
Country 2007 2008
2009a 2008/2007
2009/2008
World Total
-$808,763
-$816,199
-$500,944
0.9
-38.6
China -$258,506
-$268,040
-$226,826
3.7 -15.4
OPEC -$128,769
-$177,699
-$69,681 38.0 -60.8
EU 27
-$110,243
-$95,807
-$60,543
-13.1
-36.8
Mexico -$74,796
-$64,722
-$47,539 -13.5 -26.6
Japan -$84,304
-$74,120
-$44,769 -12.1 -39.6
Germany -$44,744
-$42,991 -$27,954
-3.9 -35.0
Canada -$68,169
-$78,342
-$20,183
14.9 -74.2
Venezuela -$29,709 -$38,814 -$18,735
30.7
-51.7
Nigeria -$29,992
-$33,966
-$15,470 13.3 -54.5
Russia -$12,031
-$17,448
-$12,838 45.0 -26.4
Thailand -$14,418
-$14,472
-$12,164
0.4 -15.9
Saudi Arabia
-$25,230
-$42,263
-$11,242
67.5
-73.4
Korea, So.
-$13,161
-$13,400
-$10,595
1.8
-20.9
Taiwan -$12,449
-$11,400
-$9,942
-8.4 -12.8
Vietnam -$8,730
-$10,112
-$9,182 15.8 -9.2
Israel -$7,907
-$7,849
-$9,177 -0.7
16.9
ASIAN NICS
-$5,509
$2,184
$3,634
139.6
66.4
Panama $3,304
$4,508
$4,054 36.5 -10.1
Brazil -$1,472
$1,846
$6,101 225.4
230.6
Singapore $7,225
$11,969 $6,620
65.7 -44.7
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Please Insert Appropriate Title
% Chg
% Chg
Country 2007 2008
2009a 2008/2007
2009/2008
UAE $9,449
$13,131
$10,610
39.0
-19.2
Australia $10,563
$11,630 $11,583
10.1 -0.4
Netherland $14,434 $18,597 $16,244
28.8
-12.7
Hong Kong
$12,876
$15,015
$17,552
16.6
16.9
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 Singapore, Hong Kong and Asian 4
NICs are positive. Members of OPEC are listed in Table 10, above. Members of Asian 4 Newly Industrializing
Countries (NICs) are: Hong Kong, Singapore, South Korea and Taiwan.
a. Rankings are based on 2009 data.
Trade Balances with Free Trade Agreement Nations
There is a commonly held perception that free trade agreements lead to larger U.S. deficits in
trade. The perception seems to be generated mostly by U.S. trade with its immediate neighbors,
Canada and Mexico. As shown in Figure 10, in 2009, the United States ran trade surpluses with
Australia, Singapore, Chile, the Dominican Republic, Morocco, and seven other FTA countries,
while it ran deficits with Mexico, Canada, Israel, Costa Rica, and Nicaragua.
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Figure 10. U.S. Balance of Merchandise Trade with FTA Partner Countries
FTA Trading Partner
Australia
11.6
Singapore
6.6
Chile
3.4
Dominican Republic
1.9
Morocco
1.1
Guatemala
0.8
Peru
0.7
Jordan
0.3
Bahrain
0.2
El Salvador
0.2
Oman
0.2
Honduras
0.1
Nicaragua
-0.9
Costa Rica
-0.9
Israel
-9.2
Canada
-20.2
Mexico
-47.5
-60
-50
-40
-30
-20
-10
0
10
20
$Billion
Source: Congressional Research Service. Underlying data accessed through Global Trade Atlas.
Notes: The United States has signed free trade agreements with Columbia, Panama, and South Korea that have
not been approved by Congress and implemented.
International Trade Statistics Web Resources
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/ (registration is required).
Historical and current U.S. exchange rate data are available from the Federal Reserve Bank of St.
Louis at http://research.stlouisfed.org/fred2/.
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Information on foreign country holdings of U.S. Treasury securities are available at
http://www.treasury.gov/tic/.
Author Contact Information
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
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