US Exports, Including Top Categories, Challenges, and Opportunities
Why Isn't America the World's Largest Exporter?
The United States exported $2.5 trillion in goods and services in 2018. That generated 14% of U.S. total economic output as measured by gross domestic product. Exports are a critical component of GDP.
America has the potential to export much more. Only 1% of U.S. businesses export. As a result, the United States is the world's third largest exporter. It falls behind China and the European Union. It barely edges out Germany.
Top U.S. Exports
The United States exports $1.67 trillion in goods or two-thirds of all exports. Like most countries, the United States exports more goods than services. People can look, feel, and easily compare the value of both local and foreign goods. They are more careful when it comes to services. They prefer relying on local people they know and trust.
Capital goods are the most successful export category. U.S.-based corporations understand the needs of other multinational firms. Of the $533 billion in capital goods exported, 67% is from six categories:
- Commercial aircraft ($130 billion), produced by Boeing and Lockheed-Martin.
- Industrial machines ($60 billion).
- Semiconductors ($48 billion), primarily Intel and Qualcomm.
- Electric apparatus ($46 billion), mostly General Elecric.
- Telecommunications ($37 billion).
- Medical equipment ($37 billion). Unlike most other U.S. export leaders, more than 80% of medical device companies are small businesses.
Next is industrial supplies and equipment. The United States exports $539 billion of materials used by manufacturers. Most of it is oil and oil-based products. Here again, the large multi-nationals do most of the trade. They are already familiar with the reputations, leaders, and processes of their main suppliers. The oil-based exports include these four categories.
- Chemicals ($62 billion). This segment is strong thanks to U.S. patent protection. One out of five patents are chemistry-related. Most of them are by-products of oil.
- Fuel oil ($42 billion). This is oil burned for fuel that's heavier than gasoline.
- Petroleum products ($111 billion). Exxon-Mobil, Chevron, and Conoco-Phillips are America's largest producers of oil.
- Plastic ($38 billion). This is a by-product of oil. The industry employs more than 900,000 workers.
Consumer goods make up 12% of U.S. exports, at $206 billion. This is mostly pharmaceuticals ($55 billion), cell phones ($27 billion) and gem diamonds ($22 billion). Consumer spending drives almost 70% of the economy. U.S. corporate experience in the domestic market creates a competitive advantage in the global market.
Automobiles are next, at 9% ($159 billion) of all goods exported. The Big Three U.S. automakers were GM, Ford, and Chrysler until the 2008 financial crisis. The auto bailout forced them to become more efficient and globally competitive.
Agricultural products are a strategic export, at $133 billion. It benefits from government farm subsidies. That makes them lower-priced than foreign competitors. As a result, this category gets a big advantage from any trade agreements that get passed. The biggest agricultural exports are enhanced through bio-engineering and chemical additives. Both lower the cost of production. They are:
- Soybeans ($18 billion), which are mainly used for cattle feed and are genetically engineered.
- Meat and poultry ($20 billion), which are raised using antibiotics.
- Corn ($14 billion), which is also genetically engineered.
Services contribute another third of total exports at $828 billion. The services America exports the most are those that support the major goods categories. For example, the qualities that help U.S. companies to excel in commercial aircraft also help travel companies. That's the largest service export at $307 billion. Next is computer and other business services at $206 billion. Protection of intellectual property, royalties and license fees is $132 billion. Banking, insurance, and other financial services export $132 billion.
Government contracts, including defense, total $20 billion.
Why the United States Doesn't Export More
The United States imports more than it exports. Why can't it export more?
First, China, India, and other emerging market countries have lower standards of living. That allows them to make consumer goods cheaper than U.S. workers can. In other words, they are better at producing some of the things U.S. consumers need than American companies are. They have the comparative advantage.
Second, some European and Japanese companies make better-quality automobiles than U.S companies. Enough Americans prefer foreign cars to make Hondas, Toyotas, and BMWs popular imports. Similarly, some foods are specialized to foreign countries: French croissants and wines, Mexican tequila, and Greek feta cheese.
Third, the U.S. economy depends on oil. While oil is one of America's largest exports, it's also its biggest import. Americans still use more oil than the country can produce. But this is shifting thanks to shale oil production in Montana and Texas. The industry has recovered from a shale oil boom that led to a bust. Oversupply caused the price of oil to fall, forcing some small companies out of business.
Why doesn't the United States just use all its domestic oil and cut imports? Geography is one reason. It's easier to export Montana oil to towns across the border in Canada than to ship it to Florida, for example. Also, some grades of oil are not high enough for U.S. consumption. They're shipped to other countries that can use them.
How U.S. Exports Fit Into the Balance of Payments
- Current Account
- Capital Account
- Financial Account