Economic snapshot | Trade and Globalization

The Trade Deficit

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A weekly presentation of downloadable charts and short analyses designed to graphically illustrate important economic issues. Updated every Wednesday.

Snapshot for July 28, 1999

The Trade Deficit

The U.S. trade deficit, which has grown rapidly since the late 1970s, reached an all-time high of $230 billion, or about 2.9% of GDP, in 1998. There are a number of factors driving this trend, including non-tariff barriers to U.S. exports in a number of key foreign markets as well as export-led growth strategies that target American markets because of low trade barriers. The overvaluation of the U.S. dollar and slow growth abroad have slackened demand for U.S. goods, exacerbating the trade deficit in the 1990s.

U.S. trade imbalances are concentrated in a few regions of the world, as shown in the first figure. The vast majority of the U.S. trade deficit is caused by manufactured goods trade imbalances with Asian countries. About 26% of the deficit in 1998 came equally from Europe and the Latin America, where the U.S. faces barriers in distributing agricultural and industrial products. of the deficit in 1998.

The second figure provides a breakdown of the U.S. trade deficit by industry. The sector with the largest U.S. trade deficit is crude oil and natural gas, which is not surprising since the United States now imports about half of its petroleum. However, only three of the top eight trade deficit sectors — apparel, leather products, and toys/sporting goods — are in low-technology products.

Ultimately, the burgeoning trade deficit, the United State’s dependence on commodity exports, and the steady erosion of output and employment in high-wage, high-technology industries are stark indicators of the failure of U.S. trade and industrial policies to nurture and sustain international competitiveness in the 1990s.

Source: Economic Policy Institute and U.S. Department of Commerce, Foreign Trade Highlights.

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