Trade Imbalances: US in Global Context

Trade Imbalances: US in Global Context

Timothy Taylor 14/04/2019 5
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A substantial amount of the discussion of international trade issues starts from the premise that the United States has huge trade deficits and China has huge trade surpluses. But what if only half of that premise is true? Here are a couple of tables on trade balances that I've clipped out of the IMF's World Economic Outlook for April 2019. One shows national trade deficits and surpluses in dollars; the other shows them as a share of the nation's GDP. Of course, the 2019 figures are projections.

The US trade deficit is large, both in absolute dollars (-$469 billion in 2018) and as a share of GDP (-2.3% of GDP). Indeed, the imposition of tariffs by the Trump administration in 2018 is projected to be followed by a larger US trade deficit in 2019--which would tend to confirm the standard lesson that trade deficits and surpluses result from underlying macroeconomic patterns of  domestic consumption, saving, and investment, not from trade agreements.

But China's trade surplus is not especially large, at about $49 billion in 2018, which is 0.4% of China's GDP. Indeed the IMF is projecting that China's small trade surpluses will turn into trade deficits by 2024. As China's population ages, it has been shifting toward becoming a higher-consumption society, and its trade surpluses have fallen accordingly.

What other countries have large trade deficits, like the US? And if it's not China, what countries have the large trade surpluses?

The US has by far the biggest trade deficit in absolute terms. When measured as a size of its economy, however, the US trade deficit is smaller than the trade deficits in the United Kingdom, Canada, South Africa (or the nations of sub-Saharan Africa as a group) and India.

When it comes to trade surpluses, the absolute size of the surpluses in Germany (+$403 billion), Japan (+$173 billion), Russia (+$114 billion) and Italy (+$53 billion) all outstrip the size of China's trade surplus (+$49 billion) in 2018. These economies are also smaller in size than China's, so as a percentage of GDP, their trade surpluses are larger than China's. Also, trade surpluses for the "other advanced economies" is large. This group is made up of the advanced economies outside the Group of Seven countries listed in the table and outside the euro area, so examples would include Korea, Australia, Norway, Sweden, Taiwan, and others.


One final note: Measures of international trade flows are imperfect. An obvious illustration of this point is that the world balance of trade must always be zero, by definition, because exports from any one location are imports for some other location. However, these tables show the world as having an overall trade surplus projected at $154 billion in 2019.

A version of this article first appeared on Conversable Economist.

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  • Ben Wilson

    I guess Trump is right. Make America Great Again !!

  • Aaron Hughes

    China is overrated

  • Sam Barron

    Despite so much winning we are losing some ground

  • John Rogers

    Don't focus on GLOBAL GROWTH! That's the current problem! GLOBALISM makes the rules that we are supposed to follow!

  • Oli Rowland

    The US trade deficit is MASSIVE !!!

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Timothy Taylor

Global Economy Guru

Timothy Taylor is an American economist. He is managing editor of the Journal of Economic Perspectives, a quarterly academic journal produced at Macalester College and published by the American Economic Association. Taylor received his Bachelor of Arts degree from Haverford College and a master's degree in economics from Stanford University. At Stanford, he was winner of the award for excellent teaching in a large class (more than 30 students) given by the Associated Students of Stanford University. At Minnesota, he was named a Distinguished Lecturer by the Department of Economics and voted Teacher of the Year by the master's degree students at the Hubert H. Humphrey Institute of Public Affairs. Taylor has been a guest speaker for groups of teachers of high school economics, visiting diplomats from eastern Europe, talk-radio shows, and community groups. From 1989 to 1997, Professor Taylor wrote an economics opinion column for the San Jose Mercury-News. He has published multiple lectures on economics through The Teaching Company. With Rudolph Penner and Isabel Sawhill, he is co-author of Updating America's Social Contract (2000), whose first chapter provided an early radical centrist perspective, "An Agenda for the Radical Middle". Taylor is also the author of The Instant Economist: Everything You Need to Know About How the Economy Works, published by the Penguin Group in 2012. The fourth edition of Taylor's Principles of Economics textbook was published by Textbook Media in 2017.

   

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