At the microeconomic level, imports of specific products can generate trade friction and pressures from constituent interests for the government to shield U.S. producers from foreign competition, provide adjustment assistance, open foreign markets, or assist U.S. industries to become more competitive. This report provides an overview of the current status, trends, and forecasts for U.S. import and export flows as well as certain trade balances. For the year 2011, U.S. merchandise exports to the world rose 16%, U.S. merchandise imports also rose 16%, and the U.S. trade deficit rose 15%, from $645 billion in 2010 to $738 billion in 2011. Because imports are greater than exports, exports must increase at a greater percentage than imports to maintain the current trade balance. As the world is recovering from the great recession countries are vying to capture the increase in global trade by keeping the value of their currencies low, particularly China. In 2009, the U.S. deficit in merchandise trade dropped by more than one-third, relative to 2008, to $506 billion, as the U.S. recession caused imports to decline faster than exports. Trade in Goods

Exports of goods of $1,497 billion in 2011 increased by $208 billion or 16% over the $1,289 billion in 2010. Imports of goods of $2,236 billion increased by $302 billion or 16% over 2010. The impact of the global financial crisis on U.S. goods trade and the slow recovery can be seen in both Figure 2 and Table 1 . This trend continued until exports of goods began to increase in May 2009 and imports began to increase in June. In 2011, exports of goods and services of $2,103 billion and imports of $2,663 billion resulted in a deficit of $560 billion. In 2011 the annual trade deficit on goods and services amounted to approximately 3.7% of U.S. GDP (U.S. GDP was $15,076 billion in 2011), up from 3.4% in 2010 but down from 4.8% in 2008, 5.1% in 2007, and 5.8% in 2006. The Trade Deficit and the Dollar

Overall U.S. trade deficits reflect a shortage of savings in the domestic economy and a reliance on capital imports to finance that shortfall. Merchandise exports in 2011 totaled $1,480 billion, while imports reached $2,208 billion (Census basis). In 2011, the U.S. deficit on current account rose to $466 billion from $442 billion in 2010. The U.S. current account deficit decreased from 2007 through 2009, which largely reflected the decline in the trade deficit during the financial crisis, though due to an increase in investment income receipts from abroad the current account deficit began declining earlier than the merchandise trade deficit. In 2011 the U.S. trade deficit with China increased by 8%, with Japan 5%, and fell (became less negative) with Mexico by 3%. In 2011, the United States had a large investment income surplus with the European Union and Canada, but large investment income deficits with China and Japan. Inflows of capital to compensate for the U.S. trade deficit and a low U.S. savings rate help to maintain the value of the dollar, but interest paid and other income that accrues to that capital is often repatriated to the home countries. For example, although the United States has an overall deficit in energy trade, it has a small trade surplus in coal.
The global financial crisis and the U.S. recession, during the 19 months from December 2007 through June 2009, caused the U.S. trade deficit to decrease, or lessen, from August 2008 through May 2009. Since then it has begun to increase again as recovery has commenced. The financial crisis caused U.S. imports to drop faster than U.S. exports, but that trend has reversed as U.S. demand for imports recovers.
Exports of goods of $1,497 billion in 2011 increased from 2010 by $209 billion or 16%, while imports of goods of $2,236 billion in 2011 increased by $302 billion, also 16%, over 2010. Though both exports and imports increased by 16%, this led to an increase in the overall merchandise trade deficit (i.e., the trade balance became more negative) for 2011 of $93 billion or 15% over 2010. Because imports are greater than exports, exports must increase at a greater percentage than imports to maintain the current trade balance.
In 2011, the trade deficit in goods reached $738 billion on a balance of payments (BoP) basis, still lower than the previous peak of $836 billion in 2006, but greater than the deficits in 2009 and 2010 of $506 billion and $645 billion. The 2011 U.S. deficit on merchandise trade (Census basis) with China was $295.4 billion, with the European Union (EU27) was $99.9 billion, with Canada was $34.5 billion, with Japan was $63.2 billion, and with Mexico was $64.5 billion. With the Asian Newly Industrialized Countries (Hong Kong, South Korea, Singapore, and Taiwan), the trade balance moved from a deficit of $5.5 billion in 2007 to surpluses increasing from $2.2 billion in 2008 to $15.4 billion in 2011.
Related to the goods trade balance is the balance on the current account, which includes merchandise and services trade plus investment income and unilateral transfers. The deficit on the current account grew in 2011 to $466 billion from $442 billion in 2010. This smaller increase in the current account deficit ($24 billion), as compared to the increase in the goods trade deficit ($93 billion), reflects an increase in the U.S. surplus in both services trade and investment income.
Trade deficits are a concern for Congress because they may generate trade friction and pressures for the government to do more to open foreign markets, to shield U.S. producers from foreign competition, or to assist U.S. industries to become more competitive. Overall U.S. trade deficits reflect excess spending (a shortage of savings) in the domestic economy and a reliance on capital imports to finance that shortfall. Capital inflows serve to offset the outflow of dollars used to pay for imports. Movements in the exchange rate help to balance trade. The rising trade deficit (when not matched by capital inflows) places downward pressure on the value of the dollar, which, in turn, helps to shrink the deficit by making U.S. exports cheaper and imports more expensive. However, interventions in foreign exchange markets by countries such as China and South Korea can keep the value of their currencies from rising too fast, thus keeping the dollar strong and imports cheaper.
Areas to watch in 2012 in international trade include the energy and transportation sectors. In energy, unconventional oil and gas production are increasing U.S. domestic supply, reducing imports, and increasing exports. In transportation, U.S. automakers appear to be exporting well to growth markets such as China.
Note: This report is current through U.S. Department of Commerce annual data revisions, published June 8, 2012, and Bureau of Economic Analysis revisions published June 14, 2012.