23.2 Trade Balances in Historical and International Context

The U.S. has run trade deficits since the 1970s, with imports outpacing exports. This gap has widened since the 1990s due to global competition, outsourcing, and increased consumer demand for foreign goods.

Trade balances vary globally. While the U.S. has the largest deficit in dollar terms, China boasts the biggest surplus. Factors like exchange rates, specialization, and trade policies shape these patterns, sometimes leading to economic tensions.

U.S. Trade Balances

Trade Balance Graphs and Data

Top images from around the web for Trade Balance Graphs and Data

• 

  Demand and Supply Analysis of International Trade | Macroeconomics View original

  Is this image relevant?

• 

  Trade Balances in Historical and International Context | OpenStax Macroeconomics 2e View original

  Is this image relevant?

• 

  Gains from Trade | Boundless Economics View original

  Is this image relevant?

• 

  Demand and Supply Analysis of International Trade | Macroeconomics View original

  Is this image relevant?

• 

  Trade Balances in Historical and International Context | OpenStax Macroeconomics 2e View original

  Is this image relevant?

1 of 3

Top images from around the web for Trade Balance Graphs and Data

• 

  Demand and Supply Analysis of International Trade | Macroeconomics View original

  Is this image relevant?

• 

  Trade Balances in Historical and International Context | OpenStax Macroeconomics 2e View original

  Is this image relevant?

• 

  Gains from Trade | Boundless Economics View original

  Is this image relevant?

• 

  Demand and Supply Analysis of International Trade | Macroeconomics View original

  Is this image relevant?

• 

  Trade Balances in Historical and International Context | OpenStax Macroeconomics 2e View original

  Is this image relevant?

1 of 3

• Trade balance calculated by subtracting value of imports from exports
  • Exports goods and services produced within country sold to foreign countries
  • Imports goods and services bought from other countries brought into country
• Trade deficit imports exceed exports
  • Imports line higher than exports line on graph
• Trade surplus exports exceed imports
  • Exports line higher than imports line on graph

Patterns in U.S. Trade Deficits and Surpluses

• Persistent U.S. trade deficits since 1970s
  • Last trade surplus recorded in 1975
• Significant growth in U.S. trade deficit since 1990s
  • Increased from around $100 billion (1990) to over$500 billion (2020)
• Factors contributing to growing U.S. trade deficit
  • Increased global competition, outsourcing of manufacturing jobs to countries with lower labor costs (China, Mexico)
  • Rising oil prices, increased reliance on energy imports from Middle East and Canada
  • Growing consumer demand for imported goods, particularly electronics and clothing
• U.S. trade deficit fluctuates with economic cycles
  • Worsens during economic expansions due to higher consumer spending on imports
  • Improves during recessions as decreased consumer spending reduces import demand

International Trade Balances

U.S. Trade Balances Compared to Other Major Economies

• U.S. has world's largest trade deficit in absolute dollar terms
  • As percentage of GDP, U.S. trade deficit smaller than some other countries (UK, Canada)
• China has world's largest trade surplus
  • China's trade surplus grew significantly after joining World Trade Organization (WTO) in 2001
• Germany and Japan also have significant trade surpluses
  • Strong manufacturing sectors focused on exports (automobiles, machinery)
• Factors affecting trade balances across countries
  • Exchange rates, currency manipulation (artificially low currency values to boost exports)
  • Comparative advantages, specialization in certain industries (Germany in high-end manufacturing, China in low-cost manufacturing)
  • Trade policies, barriers such as tariffs and quotas to protect domestic industries
• Global trade imbalances can lead to economic tensions, political disputes
  • Countries with large trade surpluses pressured to appreciate currencies, reduce export subsidies (China, Japan)
  • Countries with large trade deficits may impose tariffs, other trade barriers to protect domestic industries (U.S. steel and aluminum tariffs)