The U.S. has the world's largest trade deficit, and has run a trade deficit since 1975. In 2013, the deficit in goods and services was $472 billion, 12% lower than in 2012. That's because exports rose 2.8% while imports fell .1%. The trade deficit means that exports ($2.272 trillion) were less than imports ($2.744 trillion). (Source: U.S. Census Bureau, U.S. International Trade in Goods and Services)
The U.S. trade deficit in goods alone was $703 billion, 5.2% lower than last year. That's because the U.S. exported $1.590 trillion in goods, while importing $2.293 trillion. However, U.S. exports have been strengthening compared to imports, because the goods deficit was nowhere near the record deficit of $828 billion set in 2006. (Source: U.S. Census, Foreign Trade Balance)
Why Doesn't the U.S. Just Make Everything It Needs?
The U.S. generally runs a deficit with countries who fit at least one of the following three criteria:
- They can produce things more cheaply than we can, such as consumer products or oil (More on why this is changing with shale oil).
- They don't need what we are good at making, such as agricultural products, industrial supplies (like organic chemicals), capital goods (like transistors, aircraft, motor vehicle parts, computers, and telecommunications equipment), or high-end consumer goods (like automobiles and medicines).
- We trade a lot of everything with them, but we happen to import more than we export.
Most of the trading partners that the U.S. runs deficits with fall into the first two categories, but a few (Canada, Mexico, Germany) fall into the last.
That's why the countries with which the U.S. runs the largest trade deficits are not always its largest trading partners. Some countries just export a lot, without importing much. However, the five largest trading partners also run the largest deficits. They are
- Canada - $634 billion traded with a $31 billion deficit.
- China - $562 billion traded with a $318 billion deficit.
- Mexico - $506 billion with a $54 billion deficit.
- Japan - $194 billion traded with a $73 billion deficit.
- Germany - $161 billion traded with a $67 billion deficit.
The Largest Deficit Is With China
More than 40% of the U.S. trade deficit in goods was with China. America's $318 billion deficit was created by $440 billion billion in imports, primarily consumer electronics, clothing and machinery. This outweighed the still-significant and growing $122 billion in exports. (Source: U.S. Census, U.S. Trade in Goods With China)
However, it's important to note that many of these imports are actually U.S.-based companies that ship raw materials to be assembled cheaply 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. For more, see U.S. Trade Deficit With China.
Japan Is Next
The second largest trade deficit is much smaller, only $73 billion. That's because U.S. trade with Japan is much more balanced. The world's fifth largest economy needs the agricultural products, industrial supplies, aircraft and pharmaceutical products that the U.S. makes. Exports totaled $65 billion in 2013. Imports were higher, at $139 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 trade and made auto parts difficult to manufacture for several months. (Source: U.S. Census, Trade Balance with Japan; U.S. Exports to Japan)
Germany Is Third
The U.S. trade deficit with Germany is $67 billion and growing. The U.S. exports $47 billion, a large portion of which is automobiles, aircraft and pharmaceuticals. However, the U.S. imports nearly three times as much ($114 billion) of some of the same types of things: automotive vehicles and parts, industrial machinery and medicine.(Source: U.S. Census, U.S. Trade Deficit With Germany; U.S. Exports to Germany, U.S. Imports from Germany)
The U.S. Has a Deficit With Its NAFTA Partners
The U.S. trade deficit with Canada is $31 billion. However, this is just 5% of our total trade with them. Canada is America's largest trading partner, so a small deficit doesn't indicate that trade is out of balance. The U.S. exports $302 billion, and imports $333 billion. By far, the largest export is automobiles -- both the finished product 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. (Source: U.S. Census, Trade With Canada; U.S. Exports to Canada; U.S. Imports from Canada)
Canada, the U.S. and Mexico are partners in the world's largest trade agreement, NAFTA. The trade deficit with Mexico was $54 billion. Exports were $226 billion, made up primarily of auto parts, and petroleum products. Imports were $281 billion, with crude oil being the largest component. (Source: U.S. Census, U.S. Trade With Mexico; U.S. Exports to Mexico; U.S. Imports from Mexico)
Other Trade Deficits Are Thanks to America's Need for Oil:
Two of the next five largest trade deficits were created with countries that supply oil or natural gas, but don't need America's products. However, U.S. deficits with these countries are declining as domestic supply of shale oil and gas is growing. The largest of these was Saudi Arabia, with a $33 billion deficit and Venezuela, with a $19 billion deficit.
Ireland's deficit of $25 billion is based primarily on exports of pharmaceuticals. Italy's deficit of $22 billion is based on a wide variety of exports, including pharmaceuticals, industrial products, footwear and wine. South Korea's deficit of $21 billion is based on consumer electronics. (Sources: U.S. Census, U.S. Trade in Goods by Country; Top Ten Countries With Which the U.S. Has a Trade Deficit; U.S. Imports from Ireland; U.S. Imports from Italy). Article updated June 26, 2013