U.S. Trade Deficit by Country: Current Statistics and Issues

china-box.jpg
••• This Honbao red envelope is given with money in it for Chinese New Year. Thank you, China, for keeping our prices low. Photo: Geri Lavrov/Getty Images

The United States has the world's largest trade deficit. It's been that way since 1975. The deficit in goods and services was $502 billion in 2016. Imports were $2.7 trillion and exports were only $2.2 trillion.

The U.S. trade deficit in goods, without services, was $750 billion. The United States exported $1.5 trillion in goods. The biggest categories were commercial aircraft, automobiles, and food.

It imported $2.2 trillion. The largest categories were automobiles, petroleum, and cell phones. 

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.

  1. 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.
  2. They don't need what America is good at making. 
  1. 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.

  1. China - $579 billion traded with a $347 billion deficit.
  2. Canada - $545 billion traded with a $11 billion deficit.
  3. Mexico - $525 billion traded with a $63 billion deficit.
  4. Japan - $196 billion traded with a $69 billion deficit.
  5. Germany - $164 billion traded with a $65 billion deficit.

The Largest U.S. Deficit Is With China

More than 40 percent of the U.S. trade deficit in goods was with China. The $347 billion deficit with China was created by $462 billion in imports. The main Chinese imports are consumer electronics, clothing, and machinery. America only exported $116 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 $63 billion in 2016. Imports were higher, at $132 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 $49 billion, a large portion of which is automobiles, aircraft, and pharmaceuticals. It imports $114 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 $11 billion. That's only 2 percent of the total Canadian trade of $545 billion. The United States exports $267 billion to Canada, more than it does to any other country. It imports $278 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 $63 billion. Exports are $231 billion, made up primarily of auto parts and petroleum products. Imports are $294 billion, with cars, trucks, and auto parts being the largest components. 

How the U.S. Trade Deficit by Country Is Part of the Balance of Payments

What Is the Balance of Payments?

  1. Current Account
  2. Capital Account
  3. Financial Account