U.S. Trade Deficit by Country, with Current Statistics and Issues
The United States has the world's largest trade deficit. It's been that way since 1975. The deficit in goods and services was $566 billion in 2017. Imports were $2.895 trillion and exports were only $2.329 trillion.
It imported $2.361 trillion. The largest categories were automobiles, petroleum, and cell phones.
President Trump wants to reduce these deficits with protectionist measures. In March 2018, announced he would impose a 25 percent tariff on steel imports and a 10 percent tariff on aluminum. It came a month after he imposed tariffs and quotas on imported solar panels and washing machines. The stock market fell, as analysts worried Trump's actions might start a trade war.
Why America Can't 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. The savings are then invested in the industries America does best.
For other products, America has an 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 who fit at least one of the following three criteria.
- 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 last category. They include Canada, Mexico, and Germany.
That's why 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. Please note that the Census provides trade data by country for goods only, not services.
- China - $636 billion traded with a $375 billion deficit.
- Canada - $582 billion traded with an $18 billion deficit.
- Mexico - $557 billion traded with a $71 billion deficit.
- Japan - $204 billion traded with a $69 billion deficit.
- Germany - $171 billion traded with a $65 billion deficit.
The Largest U.S. Deficit Is With China
More than 65 percent of the U.S. trade deficit in goods was with China. The $375 billion deficit with China was created by $506 billion in imports. The main Chinese imports are consumer electronics, clothing, and machinery.
America only exported $130 billion in goods to China.
Note that many of the imports are sold by American companies that ship raw materials to be assembled for a lower cost in China. They are counted as imports even though they create income and profit for these U.S. companies. Nevertheless, this practice does outsource jobs.
Japan Is Next
The second largest trade deficit is $69 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 $68 billion in 2017. Imports were higher, at $137 billion. Much of this was automobiles, with industrial supplies and equipment making 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.
Germany Is Third
The U.S. trade deficit with Germany is $65 billion. The United States exports $53 billion, a large portion of which is automobiles, aircraft, and pharmaceuticals. It imports $118 billion in similar goods: automotive vehicles and parts, industrial machinery, and medicine.
The United States Has a Deficit With Its NAFTA Partners
Canada, the United States, and Mexico are partners in the world's largest trade agreement, NAFTA. The trade deficit with Canada is $18 billion. That's only 3 percent of the total Canadian trade of $582 billion. The United States exports $282 billion to Canada, more than it does to any other country. It imports $300 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.
The trade deficit with Mexico is $71 billion. Exports are $243 billion, mostly auto parts and petroleum products. Imports are $314 billion, with cars, trucks, and auto parts being the largest components.
How the U.S. Trade Deficit by Country Fits Into the Balance of Payments
- Current Account
- Capital Account
- Financial Account