US Trade Data Explained

 

The US trade data deficit is a key economic indicator for the country. The US is the largest exporter of goods in the world. To compare the values of imports and exports across time can be a bit confusing. The gross domestic product data from the US government are very useful tools to understand the balance of payments. For instance, if you want to know the value of imports, it is easier to find out the net deficit and compare it against the gross domestic product growth.

Net imports or the imports minus exports represent the value of the country's domestic products less the value of its external debt. When the value of imports is more than the value of exports, that's a deficit. And when the value of exports is more than the value of imports, that's a surplus. But when the opposite is true, which is the case most of the time, then that means that imports are exceeding exports. That's called an excess export or deficit. The US has a lot of excess exports, especially compared to its imports, so it is a major player in global trade.

The European Union has free trade arrangements with the US. In the past, the EU was the largest trading partner for the US, but today the US is the largest trading partner for the EU. The EU wants to continue to be a major player in the global market, but because of the free trade arrangements between the EU and the US, some of its goods are priced higher than US goods. So the EU has resorted to subsidizing its exports via the US, which is having a significant impact on the price of its exports to the US.