Publication Date: March 2009
Publisher: Library of Congress. Congressional Research Service
Research Area: Economics; Trade
This report provides an overview of the current status, trends, and forecasts for U.S. international trade. The purpose of this report is to provide current data and brief explanations for the various types of trade flows along with a short discussion of particular trends and points of contention related to trade policy.
The United States is now running record level deficits in its trade with other nations. In 2005 the U.S. merchandise trade deficit reached $766 billion on a census basis and $783 billion on a balance-of-payments basis (BoP). A surplus in services trade of $66 billion gave a deficit of $717 billion on goods and services for the year -- up $105 billion or 17.2% from the $611 billion deficit in 2004. While U.S. exports are highly competitive in world markets, these sales abroad are overshadowed by the huge demand by Americans for imported products. In 2005, U.S. exports of goods and services totaled $1.275 trillion, while U.S. imports reached $1.992 trillion (BoP). Since 1976, the United States has incurred continual merchandise trade deficits with annual amounts fluctuating around an upward trend.
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. As the deficit increases, the risk also rises of a precipitous drop in the value of the dollar and disruption in financial markets.
Overall U.S. trade deficits reflect 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 stable.
The broadest measure of U.S. international economic transactions is the balance on current account. In addition to merchandise trade, it includes trade in services and unilateral transfers. In 2005, the current account deficit rose to $791.5 billion from $665.3 billion in 2004. In trade in advanced technology products, the U.S. balance dropped from a surplus of $32.2 billion in 1997 to a deficit of $44.4 billion in 2005. In trade in passenger automobiles, the $93 billion U.S. deficit was mainly with Canada, Germany, Korea, Japan, and Mexico. In imports of crude oil, major sources of the $176 billion in imports were Venezuela, Saudi Arabia, Canada, Mexico, and Nigeria.
This report replaces CRS Issue Brief IB96038, U.S. International Trade: Data and Forecasts, by Dick K. Nanto and Thomas Lum, and will be updated periodically.