US Trade Deficit by Country, With Current Statistics and Issues
Why America Cannot Just Make Everything It Needs
The United States has the world's largest trade deficit. It's been that way since 1975. The deficit in goods and services was $621 billion in 2018. Imports were $3.1 trillion and exports were only $2.5 trillion.
In 2018, the U.S. trade deficit in goods alone was $891 billion. The United States exported $1.672 trillion in goods. The biggest categories were commercial aircraft, automobiles, and food. It imported $2.563 trillion. The largest categories were automobiles, petroleum, and cell phones.
The deficit has increased despite the trade war initiated by President Donald Trump. One reason is that the dollar strengthened between 2014 and 2016, according to the U.S. dollar index. It weakened a bit in 2017 but strengthened again in 2018. A strong dollar makes imports cheaper and exports more expensive.
Trump's protectionist measures include a 25% tariff on steel imports and a 10% tariff on aluminum. China, the European Union, Mexico, and Canada have announced retaliatory tariffs, hurting U.S. exports. The tariffs depressed the stock market. Analysts worry that Trump has started a trade war that will hurt international trade.
Why America Can't Just Make Everything It Needs
The United States could make almost everything it needs. But some countries can make products just as well for a lower price. It makes more sense to pay less for these goods.
In some products, America has a comparative advantage. These are agricultural products and industrial supplies like organic chemicals. They also include capital goods like transistors, aircraft, motor vehicle parts, computers, and telecommunications equipment.
The United States runs a deficit with countries which fit at least one of the following categories:
- They can produce things more cheaply than the United States can, such as consumer products or oil. That is changing with U.S. production of shale oil.
- They don't need what America is good at making.
- They trade a lot of everything with the United States, but America imports more than it exports.
Most of the trading partners that the United States has deficits with fall into the first two categories. The two largest are China and Japan. Some of the largest deficits are with countries in the third category. They are Canada, Mexico, and Germany.
The countries with which the United States has the largest trade deficits in goods are not always its most important trading partners. Some nations export a lot without importing much. But the top five trading partners also have the largest deficits.
The chart below shows the percentage of trade for the top five U.S. trading partners as of 2017. The first tab shows percentages based on the total volume of goods traded by all five countries. The second tab shows percentages based on the sum of all their deficits. Please note that the Census provides trade data by country for goods only, not services.
The Largest U.S. Deficit Is With China
More than 65% of the U.S. trade deficit in goods is with China. The $419 billion deficit with China was created by $540 billion in imports. The main U.S. imports from China are consumer electronics, clothing, and machinery.
Many of these imports are actually made by American companies. They ship raw materials to be assembled in China for a lower cost. They are counted as imports even though they create income and profit for these U.S. companies. This practice results in many outsourced manufacturing jobs.
America only exported $120 billion in goods to China. The top three exports were agricultural products, aircraft, and electrical machinery.
The United States Has a Deficit With Its NAFTA Partners
The second-largest U.S. trade deficit is with Mexico at $81 billion. Exports are $265 billion, mostly auto parts and petroleum products. Imports amount to $346 billion, with cars, trucks, and auto parts being the largest components.
The trade deficit with Canada is $20 billion. The United States exports $299 billion to Canada, more than it does to any other country. It imports $319 billion. The largest export by far is automobiles and parts. Other large categories include petroleum products and industrial machinery and equipment. The largest import is crude oil and gas from Canada's abundant shale oil fields.
Germany and Japan Are Third and Fourth
The third largest U.S. trade deficit is with Germany at $68.2 billion. The United States exports $58 billion. A large portion of this is comprised of automobiles, aircraft, and pharmaceuticals. It imports $126 billion in similar goods: automotive vehicles and parts, industrial machinery, and medicine.
The fourth largest trade deficit is $67.6 billion with Japan. The world's fifth largest economy needs the agricultural products, industrial supplies, aircraft, and pharmaceutical products that the United States makes.
Exports totaled $75 billion. Imports were higher, at $143 billion. Automobiles comprised much of the imports. Industrial supplies and equipment made up another large portion. Trade has improved since the 2011 earthquake, which slowed the economy and made auto parts difficult to manufacture for several months.
The Trade Deficit by Country and the Balance of Payments
- Current Account
- Capital Account
- Financial Account