Foreign trade of the United States
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Foreign trade of the United States comprises the international imports and exports of the United States. The country is among the top three global importers and exporters.
The regulation of trade is constitutionally vested in the United States Congress. After the Great Depression, the country emerged as among the most significant global trade policy-makers, and it is now a partner to a number of international trade agreements, including the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO). Gross U.S. assets held by foreigners were $16.3 trillion as of the end of 2006 (over 100% of GDP).
Introduction
The country has
Relatively few US companies export; a 2009 study reported that 18% of US manufacturers export their goods. Exporting is concentrated to a small number of companies: the largest 1% of US companies that export comprise 81% of US exports.[4]
History
The authority of Congress to regulate international trade is set out in the
The Congress shall have power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and to promote the general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States
Congressional authority over
During the Civil War, leaders of the Confederacy were confident that Britain would come to their aid because of British reliance on Southern cotton.[6] The Union was able to avoid this, through skillful use of diplomacy and threats to other aspects of European-U.S. trade relations.
Near the end of the Second World War U.S. policy makers began to experiment on a broader level. In the 1940s, working with the British government, the United States developed two innovations to expand and govern trade among nations: the General Agreement on Tariffs and Trade (GATT) and the International Trade Organization (ITO). GATT was a temporary multilateral agreement designed to provide a framework of rules and a forum to negotiate trade barrier reductions among nations.
The growing importance of international trade led to the establishment of the
Trade policy
International trade also influences the U.S. presidential election since voters' exposure to trade influences who wins the US presidency, according to US Census data covering nearly all economic activity in the United States. Moreover, employees in high-wage tradable goods and services sectors are more likely to support incumbent presidents and their parties, whereas those in low-wage manufacturing jobs will be more likely to support the opposition.[10]
The 1920s marked a decade of economic growth in the United States following a Classical
Over the long run, nations with trade surpluses tend also to have a savings surplus. The U.S. generally has developed lower savings rates than its trading partners, which have tended to have trade surpluses. Germany, France, Japan, and Canada have maintained higher savings rates than the U.S. over the long run.[14]
Some economists believe that GDP and employment can be dragged down by an over-large deficit over the long run.
In 2006, the primary economic concerns focused on: high
These issues have raised concerns among
In 1985, the U.S. had just begun a growing trade deficit with China. During the 1990s, the U.S. trade deficit became a more excessive long-run trade deficit, mostly with Asia. By 2012, the U.S. trade deficit, fiscal budget deficit, and federal debt increased to record or near-record levels following the implementation of broad unconditional or unilateral U.S. free trade policies and formal trade agreements in the preceding decades.[22][23]
The US last had a trade surplus in 1975.[24] However, recessions may cause short-run anomalies to rising trade deficits.[clarify]
The balance of trade in the United States has been a concern among economists and business people. Warren Buffett, founder of Berkshire Hathaway, was quoted in the Associated Press (January 20, 2006) as saying "The U.S. trade deficit is a bigger threat to the domestic economy than either the federal budget deficit or consumer debt and could lead to political turmoil... Right now, the rest of the world owns $3 trillion more of us than we own of them."
In both a 1987 guest editorial to the Omaha-World Herald and a more detailed 2003 Fortune article, Buffett proposed a tool called
In 2013 the United States' largest trading partner was Canada.[26] China has seen substantial economic growth in the past 50 years[when?] and though a nuclear-security summit that took place in early 2010 President Obama hoped to ensure another 50 years of growth between the two countries. On April 19, 2010, President Obama met with China's paramount leader Hu Jintao to discuss trade policies between the two countries.[citation needed]
Though the US trade deficit has been stubborn, and tends to be the largest by dollar volume of any nation, even the most extreme months as measured by percent of GDP there are nations that are far more noteworthy. Case in point, post 2015 Nepal earthquake, Nepal's trade gap (in goods & services) was a shocking 33.3% of GDP[27] although heavy remittances considerably offset that number. According to the US Department of Commerce Bureau of Economic Analysis (BEA), January 27, 2017 report, the GDP "increased 4.0 percent, or $185.5 billion, in the fourth quarter of 2016 to a level of $18,860.8 billion."[28]
In 2018, the year that a trade war with China was launched by U.S. President Donald Trump, the U.S. trade deficit in goods reached $891 billion, which was the largest on record[29] before the $1,183 billion deficit in the trade of goods recorded in 2021.[30] By the end of the Trump presidency, the trade war was widely characterized as a failure.[31]
Customs territory
The main
- American Samoa
- Guam
- Northern Mariana Islands
- United States Minor Outlying Islands (mostly uninhabited)
- United States Virgin Islands
Transportation of certain living things or agricultural products may be prohibited even within a customs territory. This is enforced by U.S. Customs and Border Protection, the federal Animal and Plant Health Inspection Service, and even state authorities such as the California Department of Food and Agriculture.
Items shipped to U.S. territories are not considered exports and are exempt from tariffs, but items shipped to Guam pay a 4% sales or use tax, items shipped to the USVI pay an excise tax (typically 0% to 4%), and Puerto Rico charges a consumption tax of 10.5–11.5%.[32]
Shipments from US territories other than Puerto Rico into the main customs territory are considered imports, and are subject to import tariffs,[34] with exceptions on certain goods listed in the Code of Federal Regulations.[35]
Investment in the United States
Gross U.S. assets held by foreigners were $16.3 trillion as of the end of 2006 (over 100% of GDP). The U.S. net international investment position (NIIP)[36] became a negative $2.5 trillion at the end of 2006, or about minus 19% of GDP.[1][37]
This figure rises as long as the U.S. maintains an imbalance in trade, when the value of imports substantially outweighs the value of exports. This external debt does not result mostly from loans to Americans or the American government, nor is it consumer debt owed to non-U.S. creditors. It is an accounting entry that largely represents U.S. domestic assets purchased with trade dollars and owned overseas, largely by U.S. trading partners.[38]
For countries like the United States, a large net external debt is created when the value of foreign assets (debt and equity) held by domestic residents is less than the value of domestic assets held by foreigners. In simple terms, as foreigners buy property in the U.S., this adds to the external debt. When this occurs in greater amounts than Americans buying property overseas, nations like the United States are said to be debtor nations, but this is not conventional debt like a loan obtained from a bank.[1][36]
If the external debt represents foreign ownership of domestic assets, the result is that rental income, stock dividends, capital gains and other investment income is received by foreign investors, rather than by U.S. residents. On the other hand, when American debt is held by overseas investors, they receive interest and principal repayments. As the trade imbalance puts extra dollars in hands outside of the U.S., these dollars may be used to invest in new assets (foreign direct investment, such as new plants) or be used to buy existing American assets such as stocks, real estate and bonds. With a mounting
Of major concern is the magnitude of the NIIP (or net external debt), which is larger than those of most national economies. Fueled by the sizable trade deficit, the external debt is so large that economists are concerned over whether the current account deficit is unsustainable. A complicating factor is that trading partners such as China, depend for much of their economy on exports, especially to America. There are many controversies about the current trade and external debt situation, and it is arguable whether anyone understands how these dynamics will play out in a historically unprecedented floating exchange rate system. While various aspects of the U.S. economic profile have precedents in the situations of other countries (notably government debt as a percentage of GDP), the sheer size of the U.S., and the integral role of the U.S. economy in the overall global economic environment, create considerable uncertainty about the future.[1][36]
According to economists such as
Trade agreements
The United States is a partner to many trade agreements, shown in the chart below and the map to the right.
The United States has also negotiated many Trade and Investment Framework Agreements, which are often precursors to free trade agreements. It has also negotiated many bilateral investment treaties, which concern the movement of capital rather than goods.
The U.S. is a member of several international trade organizations. The purpose of joining these organizations is to come to agreement with other nations on trade issues, although there is domestic political controversy to whether or not the U.S. government should be making these trade agreements in the first place. These organizations include:
- World Trade Organization
- Organization of American States
- Security and Prosperity Partnership of North America
As of 26 February 2022,
Internal institutions
American foreign trade is regulated internally by:
Imports and exports
-
Proportion of US exports to imports 1960–2004
-
US exports of goods and services 1960–2004
-
US imports of goods and services 1960–2004
-
US exports of goods by country in 2004 (does not include exports of services)
-
US imports of goods by country in 2004 (does not include imports of services)
See also
- Federal Trade Commission Act
- Trade Act of 2002
- Trading with the Enemy Act 1917
- Trade wars
- Tariff in American history
- Mergers
- Ocean freight differential
- United States balance of trade
References
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