Understanding the U.S. Trade Deficit

A reader asks an excellent question about how the trade deficit is defined:

Do you know how goods manufactured or services provided by US companies overseas and foreign owned companies in the US is handled? For example, if Dell produces a computer in China, is the good considered an import? If Goldman, Sachs provides services out of its Hong Kong office, is that value even counted? Thanks for your help.

A good rule of thumb for imports and exports is: If it is produced by a U.S. based company, and bought by a foreigner, it is an export. If it is produced by a company located outside of the U.S., even if it owned by a U.S. company, and bought by a U.S. resident, it is an import. This is true even if the U.S. resident is traveling outside of the U.S.

To answer the examples in your question: If Dell produces a computer in China, and it is shipped to the U.S. and bought by a U.S. consumer, it is considered an import. If Goldman Sachs provides services out of its Hong Kong office to the local businesses, is it not counted in the trade balance.

For more information about trade terms, the U.S. trade deficit and how the deficit affects you, see

• Definition of Trade Deficit
• U.S. Trade Deficit - 2006
• U.S. Current Account Deficit - Threat or Way of Life?