When we are out and about, we intuitively conclude there is a problem,as we encounter whole stores full of foreign goods. We are hard pressed to find something made in America -- clothing, furntiure and appliances, electronics, toys, sporting goods, no category seems immune.
This might not be so bad if we were selling to other countries as much as we are buying from them. So, to begin our inquiry, we must first consider the concept of the trade in goods deficit, measuring "excess imports," that is, by how much imported goods exceed the goods the U.S. exports to other countries.
Measuring the Trade in Goods Deficit
Just how large is that deficit? U.S. imports and exports of goods from 1985 through 2013 are presented in the following Figure:
As the figure indicates, during this period the United States has substantially increased its trade in goods with the world; however, as shown in the gap between the two curves, we have experienced a chronic trade in goods deficit, consistently importing substantially more goods than we export. In 2013 the deficit was over $700 billion, as presented in the following figure:
That sounds like a lot, but is it? -- Since 2000, these trade in goods deficits have represented a substantial sum compared to total U.S. economic output -- over four percent of GDP except during the recession of 2008-2009, and ballooning as high as 6 percent in 2005-2006, as shown in the following figure:
This means that, if we had spent that money on U.S.-made goods rather than foreign goods, GDP could have been four to six percent larger than it was during those years, when we were barely eking out 2.5% annual increases in GDP.
Another way to consider whether this is a lot of money is just to add it up: During the period 1985 through 2013, we sent $14.2 trillion dollars to other countries’ economies. And the pace was accelerating: during the first 15 years, through 1999, we accumulated $3.8 trillion in trade in goods deficits; during the 14 years 2000 through 2013, we accumulated $10.4 trillion in deficits. As we will see later, that translates into a lot of lost jobs.
Sources of the Trade in Goods Deficit
Where did all of those imports in excess of exports come from? It turns out that the lion’s share, some 88%, of our excess imports come from five countries, China, Japan, Germany, Mexico, and Canada, as presented in the following Figures:
What is extraordinary about Figure 2-5 is the curve for China breaking out of the pack beginning in 2001, reaching $325 billion in 2013, and dwarfing the other countries’ deficits by comparison. In fact, China’s trade in goods deficit has grown to 46% of the U.S. trade in goods deficit, as shown in the following Figures:
[In 1991 through 1993, the U.S. ran a trade in goods surplus with Mexico and the “other countries” category, causing an aberration in the chart.]
If trade with OPEC is excluded from the equation, then China’s share of the total trade in goods deficit rises to 51%, as shown in the following Figure:
The picture that emerges, then, is as follows:
Since 1993, the U.S. has experienced a chronic, increasing trade in goods deficit that related directly to the job losses described elsewhere:
In 2013, the annual deficit stood at some $700 billion, 4% of U.S.GDP.
In the 14 years from 2000 through 2013, the U.S. sent a total of $10.4 trillion to other countries’ economies, in spending on imported goods in excess of exports.
Five countries, China, Japan, Germany, Mexico, and Canada, account for 88% of the U.S. trade in goods deficit.
For two of these countries, the deficit has been declining, but is still substantial: Japan ($74.8 billion in 2013) and Canada ($31.6 billion in 2013).
For two of these countries, the deficit has been increasing: Germany ($68.3 billion in 2013) and Mexico ($55.5 billion in 2013.)
Regarding the rest of the world --
Of the remaining non-OPEC trade in goods deficit of $77.9 billion, South Korea, Taiwan, and Vietnam account for 70% (54.5 billion).
Of these, Vietnam is of special concern, since its deficit has grown rapidly from less than $1 billion in 2001 to over $20 billion in 2013.
In all of this, one country stands out --
The U.S. trade in goods deficit with China grew steadily from essentially zero in 1985 to over $111 billion in 2001, and then exploded to over $325 billion in 2013, accounting for 46% of the total deficit.
How and why did this happen?
GO TO How did this happen?
May 15, 2014, Ontario, CA - MIAA's founder, Jim Stuber, delivered the keynote address at the 20th annual World Trade Conference sponsored by the U.S. Department of Commerce and the California Inland Empire District Export Council in Ontario, California. To view the conference agenda, click here:
May 7, 2015, Radnor, PA. MIAA's founder, Jim Stuber, appeared as the guest of host Richard J. Anthony, Sr. on The Entrepreneur's Network TV at Radnor Studio 21. The program featured a discussion of the problems caused by offshoring manufacturing and white collar jobs and how consmers can solve the problem with their spending decisions.
Studio 21 has made the program available for viewing here: