The 12-month total is $738 billion, a historic high and up 31% from the prior 12-month period.

By Manuel Gutierrez, Consulting Economist to NKBA

The U.S. foreign trade position deteriorated further in February, with the dollar gap between exports and imports at $71 billion for the month. For the 12 months ended in February, the accumulated deficit total was $738 billion, the highest historically and 31% higher than the preceding 12 months from March 2019 through February 2020.

The worsening trade deficit in February, shown by the red line in Figure 1, results from decreases in both imports and exports.

Imports were down just 0.7% to $258 billion, but exports fell by a larger 2.6% to $187 billion.

The pandemic has had a huge impact on the U.S. trade position, which had stabilized in the decade prior to the pandemic. As shown in Figure 1, the red line indicating the trade balance was relatively flat between 2010 and 2020, hovering around the $45 billion monthly average marked by the gray dashed line.

The accumulated 12-month U.S. trade deficit of $738 billion is the highest ever recorded.

The balance deteriorated markedly last year, almost doubling from $38 billion in February 2020 to the $71 billion for February 2021.

Although the tendency is to associate trade with imports and exports of physical goods, such as agricultural products or industrial machinery, the foreign trade data also includes services. Under the services category, the data includes the sale or purchase from foreign countries of financial, transportation and consulting services, among others. Services are a very important component of U.S. foreign trade. They account for 30% of exports and a smaller 15% of U.S. imports.

Figure 2 displays the historical trend in the balance of goods and services over the last 30 years. The country had a favorable services balance throughout history, which has been overshadowed by a negative balance in goods. The positive balance in services has
been important in reducing the overall trade deficit.

The U.S. consistently exports more value in services than it buys from foreign countries.

This past February, the U.S. had a favorable balance in services of $17 billion, offset by a negative balance in goods of $88 billion, resulting in the overall deficit of $71 billion shown in Figure 1. The $17 billion services balance (Figure 2) results from $56 billion worth of services exported to foreign countries and $39 billion imported.

Although currently the export of services to foreign countries represents exactly one-third of the total, it has been even higher — 35% four years ago. These data have been available since 1992, with services traditionally ranging from 28% to 30% of total exports.

Which are the most important U.S. trading partners? As seen in Figure 3, the top four countries for exports are Canada, Mexico, China and Japan, which jointly account for 43% of total exports.

As for the top four importing countries, Germany replaces Japan, while the other three are the same and account for 46% of all imports.

When individual products traded are examined, the relative importance of individual nations varies. For illustration, the table below displays the six largest U.S. export categories over the last three years combined, and the top 15 countries importing those products from the U.S.

Civilian aircraft is the biggest U.S. export, generating an estimated $328 billion over the three years from 2018 to 2020. The top 15 countries importing aircraft from the U.S. account for 63% of the exports, with France leading, followed by China and the U.K. France imported $35 billion in aircraft products over the last three years, China $33 billion, and the U.K., $27 billion.

The second most important category is Industrial Machines, which generated $175 billion in exports. Canada leads in this category.

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