What It Measures
The trade balance (or net exports) measures the difference between what the U.S. sells to other countries (exports) and what it buys from other countries (imports).
Trade Balance = Exports - ImportsA negative number (trade deficit) means imports exceed exports.
- The report breaks down:
- Goods trade (merchandise)
- Services trade (tourism, financial services, etc.)
- Bilateral trade with major partners
Why It Matters
GDP Component: Net exports are part of GDP; a widening deficit subtracts from growth.Dollar Demand: Trade flows affect currency demand and exchange rates.Trade Policy: Informs trade negotiations and tariff decisions.Global Competitiveness: Shows U.S. competitive position in global markets.
How to Interpret
Deficit vs Surplus: The U.S. has run persistent trade deficits since the 1970s.Goods vs Services: The U.S. typically runs a goods deficit but services surplus.Real vs Nominal: Adjust for price changes to see volume trends.Petroleum Balance: Energy trade has improved with U.S. shale production.
Historical Context
The U.S. trade deficit widened significantly in 2021-2022 as strong domestic demand pulled in imports during the pandemic recovery. The monthly deficit has ranged from $70-100 billion in recent years.