Canada, Not China, Is U.S.'s Largest Trade Partner
In a recent post, I linked to a WSJ article that referred to China as the "U.S.'s largest trading partner." A Canadian, Carl Clarke, wrote an email suggesting that the WSJ got it wrong about China, and observes "that same statement is repeated frequently by various American news media." I checked U.S. trade data, and Mr. Clarke is exactly right - Canada has been, and continues to be, the U.S.'s largest trading partner, not China. For the WSJ, America's premier business paper, to get it so wrong is particularly troubling. The Census Bureau regularly (monthly) tracks the U.S.'s top ten trading partners, going back for at least twelve years, and there has never been a single month, nor a total year since 1998, when Canada has not been the largest trading partner of the United States. (Note: Trade volume is measured by the sum of exports and imports.)
The top chart above displays annual trade volumes (exports + imports) for Canada and China from 2000 through 2009 (estimated), showing that trade with Canada is typically about $200 billion greater than trade with China. The table above shows that trade with Canada in 2008 ($596.5B) was 46% greater than trade with China ($409.3B). And consider that U.S. trade with Canada was more than our trade with Germany, U.K., France, S. Korea, Netherlands and Brazil COMBINED ($545.5B).
21 Comments:
If U.S. states were countries, like in the E.U., the U.S. would reflect much greater trade.
I believe Canada is the largest trading partner (imports + exports) and the trade deficit of US with China(imports-exports) dwarfs the US trade deficits with any other country. This may be why the media is mixed up.
Canada and Mexico are trading "partners" because they return 75 dollars for every 100 dollars spent on purchases of U.S. goods and services. China returns only 25 dollars for every 100 dollars spent by the U.S. in China.
China accounts for almost 60% of the U.S. trade deficit in Goods and Services and Canada about 10%.
Canada is a partner and China is a trade associate -- the parlance needs to change.
Canada and Mexico are also our top two sources of imported oil.
Of course, the top single source of American oil is the United States.
gettingirrational:
you need to get your mind out of the mercantilist past. that theory was discredited hundreds of years ago. you might as well believe in voodoo.
China sends us goods we want at low prices. What difference does their nationality make?
when i buy a sandwich from a deli, I don't expect the deli owner to buy something from my store. my business doesn't depend on reciprocation and it doesn't make economic sense unless we all have exactly what other people want. That's why we invented money - so we don't need the double coincidence of wants.
if the deli owner gives me a discount to beat out competitors, why should I complain? even if my friend or brother owns a deli, if my friend or brother won't give me a discount and his sandwiches aren't as good, why should I eat there? If my friend or brother charges me MORE than other customers (for some odd reason), my reason to buy from them becomes even more irrational. American businesses charge us more for less.
we get goods from our trade with china. they get pieces of paper. those dollars have to come back here sometime, some way either as purchases or investment. either way we're better off.
goods we get from china have never been cheaper. I bought a plasma tv four years ago for twice the price of a new LED tv yesterday which is much better quality. I bought a computer made in china for $800 which is many times better than the American made computer I bought a year ago for $1200.
stop whining about the trade deficit. it's meaningless.
Noel, I agree. Adam Smith sums up China's economy well. Mercantilism benefits the Chinese elites, not the Chinese masses:
"Wealth of Nations represents a highly critical commentary on mercantilism, the prevailing economic system of Smith's day. Mercantilism emphasized the maximizing of exports and the minimizing of imports. In Wealth of Nations, one senses Smith's passion for what is right and his concern that mercantilism benefits the wealthy and the politically powerful while it deprives the common people of the better quality and less expensive goods that would be available if protectionism ended and free trade prevailed."
Noel, If China had the same ratio of buying U.S. Goods and Services it would be a two hundred billion dollar jobs program.
Not recognizing China as a Mercantilist country is to be part of a movement that wants to keep the average Chinese citizen down economically.
Your deli story is non-sensical but I think you know that; thus, you threw a very soft one over the middle.
BTW half of all U.S. exports are intellectual property based but theft of IP is an enormous problem for the U.S. - expecially in China.
Gettingrational: Noel is correct. China returns $100 to the U.S. for every $100 spent there, once we account for the current account (goods and services) and the capital account (financial assets). If we spend $100 on Chinese goods, and they spend $25 on U.S. goods, they spend the other $75 on U.S. finanical assets (stocks, bonds, mortgages, money market, T-bonds, etc.). In other words the Balance of Payments is always ZERO, because it's based on double-entry bookkeeping/ accounting and always has to BALANCE.
And if I spend $5,000 per year at my local grocery store, and they never purchase any of my goods or services, I would have an ongoing, perpetual annual trade deficit with my grocer of $5,000. How can that make me worse off? I wanted the groceries more than the cash, and they wanted the cash more than the groceries, so we entered into a WIN-WIN, voluntary transaction and are bother better off.
I think you're falling victim to the fixed pie fallacy, and looking at trade as Win-Lose, instead of as Win-Win.
gettingrational:
But why should the Chinese buy stuff they evidently don't want? Just to make things fair? C'mon.
And actually, Noel's example was pretty good. We all run family trade deficits with the merchants we buy stuff from. As far as I know, Buffalo runs a trade deficit with New York and Rhode Island runs one with Massachusetts.
Nobody cares. Why are you worried about the supposed deficit with China?
Professor, With all due respect the U.S. got its ass kicked economically the last decade. Perhaps if Noel and you got out of the confines of his brother's cafe you both could see dollars returning as a LOAN are not the same as purchases of Goods and Servcies. The ass kicking will stop when the U.S. gets tough.
Question: How should the U.S. approach the pervasive theft of U.S. intellectual property; which is more and more the driver of exports?
Fixed Pie? Absolutely not. China is engaging in a zero-sum game with regards to trade. I am for two-way trade to benefit the both the average U.S. and average Chinese citizen. Getting your financial ass kicked will drive down your all your purchases, both foreign and domestic.
Check the labor content and the graph tells a story of why globalization has cost Americans so many jobs particularly in manufacturing. These jobs are not coming back. For the 10 million of US citizens "unemployed" or off the rolls new jobs, when created, will likely be at a reduced annual income.
Good points on the raw materials and the trading relationship between the Mexico and Canada our border partners.
It's a good thing that we have intelligent and politically independent thinkers who question sound bites, headlines, a simple graph or chart that tend to make paint brush conclusions generally as a result of "confirmation bias". The worst cases are those that the author has a conclusion looking for data to support the conclusion. It does not matter to the author if the data is corrupted or not as long as it supports the conclusion.
This is typical of politics and less so in science and engineering.
Craig, See my comments and intellectual property theft. Why buy when you can procure without paying? The U.S. does provide what they want but it doesn't seem to have to be paid for.
Ok, to ignore the xenophobic part of the conversation...
Why is this? Surely Canada doesn't actually produce that much. Is it because we're just importing stuff from Canada that they imported from somewhere else?
China created a virtuous cycle for the U.S. It sold its goods too cheaply and lent its dollars too cheaply. It seems, China created the cycle to increase and maintain employment.
China's dolllars returning as loans is a fantastic deal. The are lending us money at near zero nominal interest rates and possibly negative real interest rates.
I wish I could find someone to lend me money on those terms. This is little different than an auto industry affiliated finance agency lending you money at low or no interest to help sell a car. China has an opportunity cost of those funds which is huge.
You can make a valid argument that America borrows too much, spends too much and saves too little. But that argument is entirely independent from the terms of the loan and the source of the loan. Chinese money was part of the cash buying boom of commercial and residential real estate in the past few years and they got slammed.
I agree their politics are awful. I agree that their wealth isn't distributed because of economic control. That's a political issue, not an economic one. We've already made the political decision to trade with them.
I agree they cost some Americans jobs through their direct and indirect subsidies. These are not jobs our economy wants or needs. It frees our labor for higher skilled jobs. The problems are all with US, not them. They are a convenient scapegoat. We need to fix what's wrong with us like unions, overregulation, high taxes, and low savings rates.
Beggar thy neighbor policies only hurt yourself. China is a huge developing economy that will NEED to consume some day soon. Our lumber, construction equipment, airplanes, and food will be going there. They are rapidly depleting all their own natural resources.
> you might as well believe in voodoo.
Careful, he's sticking pins into your effigy right now.
> Professor, With all due respect the U.S. got its ass kicked economically the last decade.
gettingrational, with all due respect -- your cranium is stuck in your rectum.
That's less of an insult than it is an observation.
The US's portion of the world economy is 25% -- we manage this despite the fact that we are not more than 1/20th of the world's population. Our individual productivity is vastly higher than that of any other nation of size and substance (i.e., I exclude places like Lichtenstein).
I believe that, within 50 years, if things don't crack up due to certain absurdities we still have to deal with (i.e., rogue nations gaining nukes), that the economics types like Dr. Perry are going to decide that they've been woefully undervaluing US productivity as it is, and that this is, in fact, a large part of the so-called "trade deficit" with China, as China "steals" our IP and then sells us manufactured goods. An accounting for that is due, and that's where a lot of the difference is going to come from.
The economic system isn't founded on rational principles at the moment, not just because of government funny-money accounting (one of the first things that needs to be written into the Second Constitution is that the government at all levels is required to use GAAP, just like any business is), but also because it doesn't do an even remotely good job of ascertaining the actual value of various forms of IP, much less track it in a way which doesn't result in a vast shadow economy.
The current pricing mechanisms don't do a very good job of that, either -- many IP producers would rather sell you a disk for 'x' dollars than sell the dozen and a half people who actually wind up with the contents of that disk for 'x/10' dollars (The RIAA/MPAA, of course, demand the 'right' to sell all 18 of them for 'x' dollars, which is ludicrous in itself, and one source of the economic confusion)
At some time in the future, there are going to be economics juniors in class asking their professors, "Jesus, professor, WTF were they thinking?"
The Nation That Lost Its Jobs, But Got Them Back
The principle of comparative advantage
The Nation That Lost Its Jobs, But Got Them Back
That presumes an absolute lack of trade from a nation, not a nation that puts its citizens first.
Try better than a cheap hit piece from Mises.
I agree they cost some Americans jobs through their direct and indirect subsidies. These are not jobs our economy wants or needs. It frees our labor for higher skilled jobs. The problems are all with them, not US.
FIFY.
I'm not sure that they're jobs that aren't wanted. Besides, why do you seem so willing to sell out the US and the jobs for which are here? You seem to want to remove any path that results in a smooth, pro-US transition that benefits the displaced in a visible way.
The visible and financial stuff is what pays the bills; the "imperceptible" does not.
They are a convenient scapegoat
...that has Audi-driving thugs that make junk and forcibly devalue their currency.
We need to fix what's wrong with us like unions, overregulation, high taxes, and low savings rates.
This is the 21st Century, not the 19th or early 20th wrt the first two. If you want to feel like you're some 19th Century deity in business, go to a Third World country, and don't come back. But then the rampant corruption will make sure you don't.
goods we get from china have never been cheaper.
The quality has also declined as well to mere junk that has the lowest possible opportunity cost (due to its volume crowding out quality).
It's a shame you wish to listen to the siren song from Asia.
O Bloody Hell, Your rambling rant on the justification of intellectual property theft insults the intelligence of every reader.
You have no direct answer to the arguments and facts I have presented above. Therefore you insult yourself.
The EU Exports much more to the world then the USA both Merchandise and Services. IN 2008 the Eu exported around 2.8 trillion dollars worth of Good and Services to the World not including trade within the EU just External Trade. The EU has 34 million manufacturing jobs while the USA has around 11 million so the EU has much more manufacturing then the USA. Also Exports more Services indicating that more people are employed in Professional/Technical areas in the EU then the US from the trade data which would not be surprising since so many of the EU Countries have Free College Tuition and also Extensive Vocational/Technical Training unlike the US which leads to a much better educated Workforce. A German Graduating with 0 Tuition debt versus an American with $100,000 in Tuition debts is a telling sign. Also so much Dual/Vocational/tech training in Germany and some other Countries tells a tale also. You can compare that with America where the biggest employer is walmart and drive up and down any street in America and see for yourself where most Americans work now-low wage, no benefit low end service economy or they are unemployed or in the underground economy whoring, selling drugs, etc to survive. Only 38% of the 18 to 65 year old US population has a full time, S.S. paying job and less then 20% of the 18 to 65 year old US population has what one could call a middle class lifestyle with Good pay and benefits/safety nets mostly Government workers now.
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