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Snapshot for February 7, 2007.

Trade deficits still rising in most industries despite strong export growth

by Robert E. Scott with research assistance from Lauren Marra

Exports of U.S. manufactured products have grown rapidly since 2002.  However, U.S. trade balances in eight out of the top 10 exporting industries have worsened since 2002, despite strong growth in the value of exports. In fact, industries with declining trade balances have outnumbered those showing improvement by almost 4-to-1.  Rapid growth in imports has more than offset gains in exports sales in most industries.  The United States imported 68% more manufactured goods than it exported in 2006.  Essentially, this imbalance means that exports will have to grow 68% faster than imports just to keep the U.S. manufacturing trade deficit from growing worse than it already is.

Changes in trade flows since 2002 for the top 10 U.S. exporting industries are shown in the chart below.  The United States is a major exporter of what are known as advanced capital goods, which include aircraft and parts, agricultural and construction machinery, navigational equipment, electronic medical equipment, and other electronic goods such as semiconductors.  However, since 2002, trade balances have worsened in eight of those industries (see chart), with the United States having an actual trade deficit in seven of them.

U.S. exports of manufactured products will have to grow much more rapidly in the future in order to stabilize and reduce the U.S. trade deficits.  The good news is that prospects for a manufacturing recovery are good if appropriate steps are taken to support export growth.