The U.S. has run a trade deficit (importing more goods and services from other countries than it exports) since the mid-1970s, which acts as a drag on overall gross domestic product (GDP) growth [Figure 1]. Although the trade deficit narrows during recessions, when imports typically fall faster than exports, the trade gap has increased over time, and currently stands at around 3.0% of GDP. Along with the massive budget deficit, the trade deficit is one of the major economic challenges facing the U.S. and has fostered the oft-repeated conventional wisdom that “we don’t make anything in the U.S. anymore.” What’s missing from this assessment, however, is the role of the U.S. as a net exporter of services and the increasing value of “good old American know-how.” Here we focus on the details of what we import and export, and the impacts on the U.S. economy.
Checking In On Trade
Posted in Weekly Economic Commentary