In the year 2012, Americans sold $2.2 trillion in goods and services to corporations and consumers in other countries. Goods and services sold to other countries are called exports. In 2012, Americans also bought roughly $2.74 trillion in goods and services from other countries (US Census, 2013). Purchases from other countries are called imports. The sum of U.S. exports and imports, $4.94 trillion, represents the total of U.S. international trade for 2012.
Each day, in fact, Americans buy and sell more foreign goods and services than are produced annually in more than 80 countries around the world. That means that U.S. companies, and the average American citizen, are avid consumers—we buy a lot from other countries. We also produce a great deal to sell to other countries; the U.S. is one of the top five exporters worldwide (CIA, 2012). Below we take a closer look at some of the data and trends that describe the recent trade performance of the United States and the rest of the world.
Exports 2012 (in billions)(US Census, 2013)
Imports 2012 (in billions) (US Census, 2013)
Let’s start by comparing the first two figures. These two pie charts illustrate our trading relationships with our largest trading partners. Looking at the first figure, we can see that Canada is our largest buyer—in relation to other countries buying our goods and services, they consume the most. After Canada, Mexico is our next largest buyer. So, geographically, our neighbors are buying the majority of our exports.
Looking at the second figure, the breakdown of US imports for 2012, you can see that the majority of our imports are bought from China. This probably comes as no surprise given the ubiquitous ‘Made in China’ label. After China, we also purchase a great deal from Mexico and Canada.
In contrasting these two pie charts, one can observe that—for the majority of our trade relationships—there is no one-for-one trading occurring. Over time this leads to trade imbalances, where one country buys much more than it sells to another country. The U.S. currently has a trade imbalance with China. In 2012, the U.S. trade imbalance with China was valued at approximately 315 billion (US Census, 2013).
The fact that the U.S. economy is so large (it contains so many products and consumers) leads some to wonder whether the United States actually needs to trade with other countries at all. This Issue in Depth addresses the questions of:
- Why do nations choose to trade with other nations?
- How do they decide which goods to export, which to import— and with whom?
- What impact does trade have on the economies of other nations?
- How do governments cope with these impacts?
- How has trade changed over the past few decades?
- What concerns do Americans have about international trade?
The United States will be the focus of the discussion, but many of the key ideas apply equally well to other countries.
To gain a deeper understanding of the fundamentals of international trade, a short primer on the economic theory behind imports and exports follows this section. Concepts such as comparative advantage, exchange rates, trade specialization, and trade restrictions are explained in detail in this section.
Readers who feel well-grounded in these concepts may wish to skip to the section on trade liberalization, which explores efforts to promote international trade and some of the ongoing controversies about trade policy.