The Contentious World of U.S. Foreign Trade

Through announced plans for big tariff hikes, the new administration in Washington has signaled a preoccupation with U.S. foreign trade statistics pertaining to ‘goods’ (i.e., commodities and all manner of consumable physical objects).

As a further point of clarification, the U.S. usually runs a surplus in ‘services’ (e.g., travel and tourism; management and consultancy fees; financial transactions; etc.) that, lately, has been offsetting only about a fifth of the deficit in goods.

In bullet form, this article will set out some of the facts concerning U.S. sales to and purchases from other countries, with a focus on the three most clearly in the special-attention crosshairs, China, Mexico, and Canada.

There will also be comments about trade-related ties to domestic construction activity.

• The U.S. monthly trade deficit in goods, annualized, reached an extreme of -$1.5 trillion in March 2022. Since then, it has retreated somewhat, although it has dropped below a trillion dollars in only one month, March 2023 at -$997 billion. In the latest month, October 2024, it was just a bit shy of -$1.2 trillion.

• Six years ago, in four months of 2018, China accounted for half or more of the U.S. trade deficit in goods. During the intervening years, that proportion has diminished to the point where in most months of 2024, China’s share of the shortfall has been around a quarter (i.e., exactly 25.0% in latest October).

• While China’s bite has loosened, southern neighbor Vietnam’s tooth marks have sunk in deeper, partly due to a transfer of production from the one country to the other. Vietnam’s share of the U.S. deficit has risen to a shade above 10%.

• Mexico’s proportion of the deficit is nearly 15%. Combining China, Vietnam, and Mexico, they make up 50%, or half, of the entire U.S. goods trading shortfall. 

• By comparison, the shortfall in trade with Canada (4.1%) hardly registers, being on a near par in latest October with South Korea and Thailand (each 4.3%) and India (4.5%), and below other countries including Ireland (8.1%), Taiwan (6.6%), Japan (6.5%), and Germany (5.4%).

• The trade disadvantage with Taiwan is partly due to that nation’s pre-eminence in computer chip production. The CHIPS and Science Act passed into law in the summer of 2020 has been a measure to revive computer hardware manufacturing in America and, as an offshoot, it has been a boon to construction activity in both expected (i.e., due to existing high-tech affiliations) and seemingly novel communities across the country.

• There are three countries with which the U.S. is running large deficits in a trading category termed ‘advanced technology products’, where ‘information and communications’ is the largest subset, followed by ‘biotechnology’. Those three countries, as per latest October’s year-to-date deficit numbers, are: China, -$56 billion; Taiwan, -$51 billion; and Ireland, -$49 billion. Ireland is a sleeper among America’s problematic (i.e., in the sense of deficits) trading partners.

• It might be supposed that the U.S. would have a significant trade deficit with the de facto leader of OPEC, Saudi Arabia. Such is not the case. U.S. trade with Saudi Arabia is about in balance. As for countries with which the U.S. runs a trade surplus, the list is short, and the dollar volumes are small. Included in October were Brazil, Australia, Hong Kong, Netherlands, and the United Kingdom.

• Further about oil, and despite the U.S. continuing to be the world’s largest producer (i.e., more than double the output of Saudi Arabia annually), a quite sizable volume delineated in barrels (i.e., 2.0 million year-to-date through October) continues to enter the country. By far, the largest supplier of imported oil to the U.S. economy is Canada, accounting for 63% of the total.

• The U.S. does export a higher dollar volume of petroleum products than it imports. But there are solid reasons for why a formidable amount of importation is still taking place. There is a mismatch between types of oil (e.g., non-domestic ‘heavier’ varieties) needed for processing at certain refineries, and there continue to be gaps in the pipeline infrastructure servicing some, mainly coastal, regional markets.

• There is a major player in the consumer products field where the U.S. trade shortfall is surprisingly larger than might be expected. In motor vehicles and parts, U.S. exports year-to-date in October were less than half the level of imports, yielding a negative balance of -$247 billion. The components of the overall shortfall were passenger vehicles, -$127 billion; trucks and buses, -$30 billion; and parts, -$90 billion.

• By country, the U.S. auto sector deficit is most severe with Mexico (-$116 billion through October). Next in line are Japan, -$44.1 billion; South Korea, -$40.1 billion; and Germany, -$20.6 billion. As for the country taking the largest dollar volume of U.S. auto-related exports, Canada, the U.S. had a trade advantage of +$7.2 billion through October.

• The -$116 billion gap in motor vehicle trade with Mexico to date this year is about equally spread, at close to -$40 billion a pop, among passenger cars, trucks/buses, and auto parts. As a source of American ‘truck and bus’ imports, as well as parts imports, Mexico has a huge lead over all other countries.

• In a ranking of States by dollar volume of exports, there is one colossal standout, Texas. At $379 billion through October, it outdistanced second-place California’s $153 billion by more than double. Next in line were New York, $79 billion; Louisiana, $67 billion; Illinois, $67 billion; and Florida, $60 billion. Texas exports petroleum, chemical, transportation, computer, and electronic products, plus agricultural commodities. Mexico, accounting for nearly one-third of foreign sales, is the Lone Star State’s major trading partner.
  

Elaboration concerning some of the above bullet points is warranted. During the previous Donald Trump Presidency, environmental and Indigenous land-claim court challenges blunted nearly all efforts at pipeline expansions, including the proposed Keystone XL line that would have seen a much greater volume of shipments flowing south from Canada.

During the next period of GOP dominance in the seat of power, abundant indications point to full-blown support for traditional energy development, accompanied by massive investment expenditures in drilling, fracking, refining, and liquefied natural gas (LNG) plants.

At the same time, and as a noteworthy sidebar, newly opened pipeline capacity north of the border (Trans Mountain oil and Coastal GasLink LNG) is, finally, enabling Canadian energy export sales to countries other than the United States.

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