With announcements of new tariffs emerging every weekend from the White House, we thought it would be worth while taking a more detailed look at what is so concerning to our newly elected President, breaking the Trade Balance in Goods down by country and by major items.
What becomes clear in the analysis is that the President appears to be much less concerned if we run a large US trade deficit with a given country and more narrowly concerned with countries that the US’s imports from the most. Seen from a slightly different perspective, the $334 billion worth of US exports to Mexico that might suffer under a retaliatory trade war is not a part of this policy calculus yet.
Our first table simply shows the US Trade Balance in dollars by country with the Trade Deficit also shown by its percentage contributions. What jumps out first when examining this table is the difference between the current tariff focus on Mexico, China and Canada and the actual trade figures.
First of all, poor Canada. Yes, Canada is our third largest source of imports behind Mexico and China, but they also take in an enormous amount of American export goods. As you can see, tiny Ireland runs a larger trade deficit with the US than our vast northern neighbor! Canada contributes a mere 5.3% to the trade deficit, compared to 10.2% from Vietnam. The targeting of Canada ignores the fact that Canadians buy a huge volume of US goods, and instead focuses solely on the large volume of US imports from Canada.
Second, the largest Trade Imbalance—when measured as the ratio of US imports to exports—comes mostly from Asia. Most Asian countries have twice as many imports to the US as they receive in return. Interestingly, major US allies in Asia, notably South Korea and Japan, have not been in the focus of Trump’s crosshairs. Japan, in particular, has taken a strategic approach of flattering and wooing Trump, a move that thus far has paid off. Finally, Vietnam, hardly a US ally, has also become the low cost manufacturing alternative to China, but has remained off the radar, perhaps because of its “not-made-in-China” status.
At some point soon, Americans and Europeans alike know that Trump
will target the European Union, which actually exports more to the US than any other country or region, and has a trade deficit with the US that is second only to China. European government officials have been war planning for the appropriate countermeasures when the tariffs inevitably come in the near future.
Rank | Country | Exports | Imports | Trade Deficit | Percent of Deficit |
|---|---|---|---|---|---|
1 | $143.5 | $438.9 | ($295.4) | 24.6% | |
2 | $334.0 | $505.9 | ($171.9) | 14.3% | |
3 | $13.1 | $136.6 | ($123.5) | 10.3% | |
4 | $16.5 | $103.3 | ($86.8) | 7.2% | |
5 | $75.6 | $160.4 | ($84.8) | 7.1% | |
6 | $42.3 | $116.3 | ($74.0) | 6.2% | |
7 | $79.7 | $148.2 | ($68.5) | 5.7% | |
8 | $65.5 | $131.5 | ($66.0) | 5.5% | |
9 | $349.4 | $412.7 | ($63.3) | 5.3% | |
10 | $41.8 | $87.4 | ($45.6) | 3.8% | |
11 | $32.4 | $76.4 | ($44.0) | 3.7% | |
12 | $43.5 | $59.9 | ($16.4) | 1.4% | |
13 | $49.7 | $42.3 | $7.4 | -0.6% | |
14 | $79.9 | $68.1 | $11.8 | -1.0% |
Rank | Region | Exports | Imports | Trade Deficit | Percent of Deficit |
|---|---|---|---|---|---|
Total, All Countries | $2,065.2 | $3,267.4 | ($1,202.2) | 100.0% | |
Total, Top 15 Countries | $1,456.7 | $2,522.0 | ($1,065.3) | 88.6% | |
Europe | $503.6 | $770.8 | ($267.16) | 22.2% | |
South & Central America | $206.1 | $158.8 | ($47.30) | 3.9% |
Next, let’s take a quick look at what the US exports to the rest of the world. As you can see, US exports are fairly well diversified. Unlike many smaller countries that specialize in a specific industry or product, the US does not have a single dominant export.
Crude oil products, chemicals, and machinery & transport equipment together account for about 55% of total exports. However, as a large and complex economy, the US exports a broad and varied portfolio of goods.
Category | Trade Bal $ | Trade Bal % |
|---|---|---|
Total Balance of Payment Basis | ($1,211.7) | 100% |
Food and Live Animals | ($44.4) | 4% |
Beverages and Tobacco | ($26.4) | 2% |
Crude Materials Except Fuels | $46.8 | -4% |
Mineral Fuels and Lubricants | $74.4 | -6% |
Petroleum products and preparations | $9.2 | |
Animal and Vegetables Oils | ($14.5) | 1% |
Chemicals and Related Products | ($133.7) | 11% |
Manufactured Goods by Material | ($193.5) | 16% |
Textile yarn, fabrics | ($21.6) | 2% |
Nonmetallic mineral manufactures | ($31.1) | 3% |
Iron and steel | ($24.1) | 2% |
Nonferrous metals | ($37.2) | 3% |
Manufactures of metals | ($42.9) | 4% |
Machinery and Transport Equipment | ($860.4) | 71% |
Power generating machinery | ($43.5) | 4% |
Specialized industrial machinery | ($29.2) | 2% |
Metalworking machinery | ($8.6) | 1% |
General industrial machinery | ($78.7) | 6% |
Office machines | ($182.5) | 15% |
Telecommunications equipment | ($150.3) | 12% |
Electrical machinery | ($192.9) | 16% |
Road vehicles | ($251.1) | 21% |
Transport equipment | $76.5 | -6% |
Miscellaneous Manufactured Articles | ($354.8) | 29% |
Scientific and controlling equipment | ($28.5) | 2% |
Miscellaneous manufactured articles | ($130.8) | 11% |
Miscellaneous Commodities | ($40.1) | 3% |
Special transactions | ($91.5) | 8% |
On the import side of the ledger, we see a higher degree of concentration. Manufactured goods of varying complexity dominate US imports. In fact, Manufactured Goods, Machinery & Transport Equipment, and Miscellaneous Manufactured Articles together account for about two-thirds of all imports, reflecting a long-term shift as manufacturing jobs have steadily migrated overseas since World War II.
As shown in the chart below, the percentage of US jobs in manufacturing has been in secular decline for decades and has remained nearly flat at around 8.5% since 2008. And frankly, it’s hard to see how tariffs could reverse this trend. Even if the share of US manufacturing jobs were to double, they would still make up only 17% of all jobs—roughly where we were in the early 1980s and far from being the primary source of US employment.
Category | Trade Bal $ | Trade Bal % |
|---|---|---|
Total Balance of Payment Basis | ($1,211.7) | 100% |
Food and Live Animals | ($44.4) | 4% |
Mineral Fuels and Lubricants | $74.4 | -6% |
Petroleum products and preparations | $9.2 | -1% |
Chemicals and Related Products | ($133.7) | 11% |
Manufactured Goods by Material | ($193.5) | 16% |
Paper and paperboard | ($5.6) | 0% |
Textile yarn, fabrics | ($21.6) | 2% |
Nonmetallic mineral manufactures | ($31.1) | 3% |
Iron and steel | ($24.1) | 2% |
Nonferrous metals | ($37.2) | 3% |
Manufactures of metals | ($42.9) | 4% |
Machinery and Transport Equipment | ($860.4) | 71% |
Power generating machinery | ($43.5) | 4% |
Specialized industrial machinery | ($29.2) | 2% |
General industrial machinery | ($78.7) | 6% |
Office machines | ($182.5) | 15% |
Telecommunications equipment | ($150.3) | 12% |
Electrical machinery | ($192.9) | 16% |
Road vehicles | ($251.1) | 21% |
Transport equipment | $76.5 | -6% |
Miscellaneous Manufactured Articles | ($354.8) | 29% |
Scientific and controlling equipment | ($28.5) | 2% |
Miscellaneous manufactured articles | ($130.8) | 11% |
Miscellaneous Commodities | ($40.1) | 3% |
Finally, there is the US Trade Deficit, which reflects the net difference between exports and imports. While the US runs a surplus in crude oil and transport equipment (think: Caterpillar), it faces a trade deficit in nearly every other category—especially in manufactured goods.
Category | Trade Bal $ | Trade Bal % |
|---|---|---|
Total Balance of Payment Basis | ($1,211.7) | 100% |
Food and Live Animals | ($44.4) | 4% |
Beverages and Tobacco | ($26.4) | 2% |
Crude Materials Except Fuels | $46.8 | -4% |
Mineral Fuels and Lubricants | $74.4 | -6% |
Petroleum products and preparations | $9.2 | -1% |
Animal and Vegetables Oils | ($14.5) | 1% |
Chemicals and Related Products | ($133.7) | 11% |
Manufactured Goods by Material | ($193.5) | 16% |
Paper and paperboard | ($5.6) | 0% |
Textile yarn, fabrics | ($21.6) | 2% |
Nonmetallic mineral manufactures | ($31.1) | 3% |
Iron and steel | ($24.1) | 2% |
Nonferrous metals | ($37.2) | 3% |
Manufactures of metals | ($42.9) | 4% |
Machinery and Transport Equipment | ($860.4) | 71% |
Power generating machinery | ($43.5) | 4% |
Specialized industrial machinery | ($29.2) | 2% |
Metalworking machinery | ($8.6) | 1% |
General industrial machinery | ($78.7) | 6% |
Office machines | ($182.5) | 15% |
Telecommunications equipment | ($150.3) | 12% |
Electrical machinery | ($192.9) | 16% |
Road vehicles | ($251.1) | 21% |
Transport equipment | $76.5 | -6% |
Miscellaneous Manufactured Articles | ($354.8) | 29% |
Scientific and controlling equipment | ($28.5) | 2% |
Miscellaneous manufactured articles | ($130.8) | 11% |
Miscellaneous Commodities | ($40.1) | 3% |
Special transactions | ($91.5) | 8% |
So what are the take aways?
A significant portion of manufactured goods in the US are imported, and manufacturing jobs make up only a small percentage of the workforce.
Many of these imports come from countries that are US allies.
Trump is more focused on imports than the overall trade deficit and sees tariffs as a tool to restore US manufacturing jobs. However, he appears to overlook the potentially dire consequences of counter-tariffs on US exporters as well as the broader historical context—US manufacturing jobs peaked at 26.8% of the workforce in the early 1950s, long before most of us were born.
Should there be more manufacturing jobs in the US? From a national defense perspective, the answer is yes. If Taiwan’s semiconductor foundries were to go offline, the global economy would implode, making a strong case for investing in cutting-edge domestic manufacturing capabilities, at least in advanced semiconductors.
However, the broader reality is that since World War II, US workers have increasingly shifted toward the service sector and other non-manufacturing industries, while US companies have outsourced production overseas because of cost considerations.
Sadly, even four years of tariffs are unlikely to reverse a trend that has been in place for nearly 80 years.
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