Trade Deficit
Since the mid-1970s, the United States has run a deficit in merchandise trade, meaning that payments for imports exceeded receipts for exports. This large and growing deficit on the merchandise trade balance reached a maximum of $883 billion in the second quarter of 2008.
As a result of the recession, dramatic declines of imports in excess of exports during the fourth quarter of 2008 and the first quarter of 2009 reduced the merchandise trade deficit by 49%, to $449 billion in the second quarter of 2009. This trend of declining imports resulted in the lowest quarterly deficit level since early 2002. The merchandise trade deficit then increased to $686 billion in the fourth quarter of 2013, with much of the difference from the 2008 level ($131 billion) attributable to a $158 billion increase in net exports of crude oil and petroleum products.
Crude oil and petroleum products play a significant role in the balance of U.S. trade accounts, and the value of petroleum trade is sensitive to both changes in price and volume. The United States has historically imported more petroleum and petroleum products than it has exported. The deficit reached a maximum of $452 billion in the third quarter of 2008, as a result of a sharp run-up in prices.
By the first quarter of 2009 the petroleum trade deficit improved to $174 billion as energy prices and domestic demand fell and U.S. production increased. From the first quarter of 2009 to the second quarter of 2011, the deficit increased to $346 billion, because of continued economic recovery in the United States and higher crude oil prices. Since then, prices have remained high as exports of petroleum products have increased while crude oil imports have declined. As of the fourth quarter of 2013, the deficit was $203 billion.
Trade in petroleum and petroleum products contributes to the overall U.S. goods deficit, but this deficit would exist even if the United States did not import oil. Since 2009, exports of petroleum and petroleum products have played a growing role in reducing the overall merchandise trade deficit. While there have been recent increases in crude oil exports, nearly all of the petroleum exports through 2013 were refined petroleum products.
Walmart, the county's largest retailer, has benefited from the price declines associated with the shift to low-cost foreign suppliers. Developing economies have become the new, low-cost suppliers of a wide range of products purchased by consumers at big-box retailers, and used as intermediate inputs by producers, with China — now the largest exporter to the United States — accounting for about a third of the growth in such imports.
Dean Baker noted "Major retailers like Walmart have worked for decades to develop low cost supply chains in the developing world. They make a point of buying products from China, Cambodia, Bangladesh, or anyone else who delivers goods at rock bottom prices. They would not be pleased by measures to reduce the trade deficit. Similarly, major manufacturers like General Electric and Boeing have all established operations in developing countries to take advantage of lower cost labor. These companies also would not be pleased with policies designed to reduce the size of the trade deficit. In fact, as a practical matter there are probably many low-wage employers, like Walmart and McDonalds, that would not be especially happy to see the trade deficit sharply reduced. The millions of jobs that would result from more balanced trade would mean a tighter labor market. This would give their employees more bargaining power, likely forcing up wages and leading to better working conditions.... The trick to getting the trade deficit down is a lower-valued dollar. This makes our exports cheaper to foreigners, meaning we export more. And it makes imports more expensive, so we buy domestically produced goods rather than imports."
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