Title: The U.S. Trade Deficit: How Much Does It Matter? | Council on Foreign Relations
Headings: The U.S. Trade Deficit: How Much Does It Matter?
The U.S. Trade Deficit: How Much Does It Matter?
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Introduction
What is a trade deficit?
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What causes it?
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A summary of global news developments with CFR analysis delivered to your inbox each morning. Most weekdays.
How has the U.S. trade deficit changed over recent decades?
Why are some observers concerned about the trade deficit?
What are the arguments against focusing on the deficit?
What are the options to reduce the deficit?
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Content: The deficit has averaged $535 billion since 2000, much higher than in previous decades, when it accounted for well below 2 percent of GDP. The United States ran either a surplus or a small deficit through the 1960s and 1970s, after which a large deficit opened in the 1980s and continued to expand through the 1990s and 2000s. By far the largest bilateral trade imbalance is with China. The United States ran a $419 billion goods deficit with China in 2018. The next largest contributor to the goods deficit, at $151 billion, is the European Union, followed by Mexico at $81.5 billion, Japan at $67.6 billion, and Malaysia at $26.5 billion. The deficit with China expanded dramatically beginning in the early 2000s from an average of $34 billion in the 1990s. Some economists refer to this as the “ China Shock ” [PDF] and attribute it to the unexpectedly rapid growth of China’s export manufacturing sector in the late 1990s. This happened as Beijing undertook deep economic reforms and implemented policies to subsidize production, accelerate industrialization, and boost exports. In the process China earned the moniker “the world’s factory.” Economists also note the acceleration of Chinese export growth after the country’s entry into the World Trade Organization (WTO) in 2001.