News & Analysis

US Trade vs the World

January 30, 2018

US Trade vs the World

Since Donald Trump became the President of the United States in 2016, we have heard him say a lot about the “unbelievably bad” trade agreements the world’s largest economy has with some countries around the world. We have already seen Trump attempt to renegotiate the North American Free Trade Agreement (NAFTA), which has reached a deadlock, and there is a possibility of the US scrapping the decades-old agreement between Canada and Mexico. But how does the trade balance look between the US and other nations around the world?

Trade Surplus

President Trump has said that “We don’t have any good deals. In fact, I’m trying to find a country where we actually have a surplus of trade as opposed to… Everything’s a deficit.”
However, there are many countries which the US has a positive trade balance with. It’s largest trade surplus is with Hong Kong at $29.7 billion, followed by the Netherlands. The US exports reached nearly $37 billion with Hong Kong in 2017 (from January to November) with $6.9 billion worth of goods imported. However, some analysts are suggesting that Hong Kong’s trade with the US will suffer from the ongoing tensions between the two largest economies in the world.

Trade Deficit

Trump has aimed some strong words towards the countries which the US has a negative trade balance with. Most of the criticism has been towards the trading relationship with China – the world’s second largest economy. He may have a point as the trade deficit stands at a whopping $344.4 billion (year-to-date). Trump said – “With China we have close to a $500 billion trade deficit, so we have to do something. I spoke to the president, I spoke to many people — we’re going to work on that very, very hard. And we’re going to do things that are the proper things to do.”
The second largest trade deficit is with one of Americas two closest neighbours – Mexico. Donald Trump has slated the NAFTA agreement in particular, which he has called a disaster for US manufacturing. However, since Trump was elected we have seen some big American companies move their production back to the US. Most recently Fiat Chrysler, the world’s eighth largest auto maker announced its plans to move production of its Ram heavy pickup trucks from Mexico to Michigan. Moving production of the Ram, which is mainly sold in the US and Canada, means that Fiat Chrysler will not be paying the high import duties which are likely to apply if the NAFTA agreement is rolled back.

Overall, we can see why Trump has been criticising the trading agreements with some countries around the world. But will he be able to change it during his presidency? His current actions would suggest that the United States’ trade policies will be changing.