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May Foreign Trade in the U.S. and Canada Moved Tentatively

07/11/2012 by Alex Carrick, RCD Canadian Chief Economist

In May, the U.S. current dollar volume of exports – both goods and services combined – rose 0.2% versus April while imports declined 0.7%. 

As a result, the annualized foreign trade deficit declined from $607 U.S. billion to $584 billion.

While a deficit of nearly $600 billion is still substantial, it’s well short of the -$800 billion figure reached several times between mid-2005 and mid-2006.

Sluggish growth at home and abroad is clearly having an impact on trade with other countries.

For example, the fact the U.S. isn’t functioning at full capacity is keeping down oil imports. Similarly, a flat-on-its-back housing sector has reduced the demand for foreign lumber.

And American consumers, still struggling to find jobs and increase incomes, while also paying down household debt, aren’t importing from China and other emerging nations in Southeast Asia at the same frenzied pace as sometimes occurred in the past.  

The foregoing factors are mainly born out of negatives. Several positives for the American economy with respect to foreign trade are also worth commenting on.

The need for natural gas from outside sources has greatly diminished with the development of new shale deposits in a number of regions.

Most famously, North Dakota is undergoing an energy boom that is displacing some foreign fossil fuels.

Manufactured export sales have also increased significantly. Caterpillar Inc. has become the darling of the business-media set because of its success in selling machinery and equipment around the world.

Year-over-year total U.S. exports in the latest month were +4.2%, well ahead of the +2.6% figure for total imports.

But the world economy is continuing to flounder on account of Europe’s debt problems.

To what degree is the U.S. tied to the Euro zone? And to some other key groupings for that matter, such as the BRIC nations? Let’s look at May’s data.

Starting with Europe, the 27-member European Union accounted for 17.4% of all U.S. exports in the latest month and 16.8% of American imports.

The percentages for the smaller 17- member Euro zone were an identical 12.9% for both exports and imports.

Germany, the economic leader in Europe, took 3.2% of total U.S. exports while supplying 4.6% of her imports.

What about some of the nations that have been in the headlines for actually or possibly requiring bailout assistance?

In May, Spain took a negligible percentage of U.S. exports (0.6%) while supplying an even smaller proportion of imports (0.5%).

Italy’s numbers were a little higher, 1.1% for exports and 1.7% for imports.

Ireland was insignificant for exports (0.4%), but made a slight impact in imports (1.6%).

Next to Germany, the country in Europe with the greatest trade importance for the United States is the United Kingdom. Exports to the U.K. in May were 3.4% of the U.S. total and imports were 2.4%.

Leaving aside China for the moment, what about the other three nations – Brazil, Russia and India – in the BRIC grouping?

Brazil (2.6%) was more important for exports than India (1.4%) and Russia (0.6%). But India (1.8%) played a bigger role in imports than the other two countries (1.3% each).

There are several other countries that are important for the U.S., more on the import side than with respect to exports. Included are Japan (a supplier of 6.1% of U.S. imports), Saudi Arabia (2.9%) and South Korea (2.8%).

By far the most important destinations for U.S. exports continue to be: (1) Canada (19.5%); (2) Mexico (14.1%); and (3) China (6.8%). Those three nations alone added up to 40% in May.

The largest sources of imports were: (1) China (17.6%); (2) Canada (14.0%); and (3) Mexico (12.5%), combining for a total of 44.1%.  

As for Canada’s trade position in May, goods exports were flat while goods imports rose 0.4%, leaving the merchandise trade balance (-$9.5 billion Canadian annualized) in slightly worse shape than the month before (-$7.5 billion).

Before the recession, Canada traditionally ran a $40 billion to $80 billion surplus each month. The failure to return to that level of surplus – or, indeed, a positive balance at all – has been impeding overall economic growth in the country.

U.S. foreign trade: goods and services balance
U.S. foreign trade: goods and services balance
Based on seasonally adjusted monthly figures, projected at an annual rate.
Analysis of the U.S. foreign trade position usually focuses on goods and services exports minus goods and services imports.
Data source: U.S. Bureau of the Census/Chart: Reed Construction Data - CanaData.
U.S. goods trade deficit with major countries and areas – May 2012
    Annualized Per cent
of Total
      Annualized Per cent
of Total
    Figure U.S. Goods       Figure U.S. Goods
    (U.S. $ billions) Trade Deficit       (U.S. $ billions) Trade Deficit
Canada 1 year ago -30.2 3.9%   Euro Area 1 year ago -93.0 12.0%
  3 months ago -34.3 5.9%     3 months ago -69.7 12.0%
  Latest month  -26.7 3.3%     Latest month  -102.6 12.7%
Mexico 1 year ago -73.5 9.5%   Indonesia* 1 year ago -14.0 1.8%
  3 months ago -69.8 12.0%     3 months ago -9.8 1.7%
  Latest month  -76.2 9.5%     Latest month  -7.8 1.0%
Germany 1 year ago -45.4 5.8%   OPEC 1 year ago -137.4 17.7%
  3 months ago -43.2 7.5%   Nations 3 months ago -77.3 13.3%
  Latest month  -58.9 7.3%     Latest month  -134.1 16.7%
China 1 year ago -299.3 38.5%   Nigeria 1 year ago -27.4 3.5%
  3 months ago -232.4 40.1%   (OPEC 3 months ago -10.3 1.8%
  Latest month  -312.5 38.8%   member) Latest month  -16.3 2.0%
Japan 1 year ago -32.2 4.1%   Saudi Arabia 1 year ago -32.4 4.2%
  3 months ago -83.9 14.5%   (OPEC 3 months ago -32.9 5.7%
  Latest month  -77.2 9.6%   member) Latest month  -53.8 6.7%
India 1 year ago -17.7 2.3%   Venezuela 1 year ago -37.1 4.8%
  3 months ago -18.3 3.2%   (OPEC 3 months ago -22.2 3.8%
  Latest month  -20.9 2.6%   member) Latest month  -19.1 2.4%
*Indonesia has a large trade surplus with the U.S. but it is mainly in products other than oil. In fact, the country has become a net importer of oil.
The five major suppliers of crude oil to the United States are Canada, Saudi Arabia, Mexico, Venezuela and Nigeria.
Data source: U.S. Census Bureau (Department of Commerce) (based on not seasonally adjusted current dollar monthly figures).
Table: Reed Construction Data - CanaData.
Canada’s foreign trade: the merchandise trade balance
Canada’s foreign trade: the merchandise trade balance
Based on seasonally adjusted monthly figures, projected at an annual rate.
Analysis of Canada's foreign trade position usually focuses on the Merchandise Trade Balance which is goods exports minus goods imports.
Data source: Statistics Canada / Chart: Reed Construction Data - CanaData.
Canada's trade by major goods and commodities - May 2012
Latest Period   Year to Date
APR 12 MAY 12     Jan-MAY 11 Jan-MAY 12  
(Cdn $ billions) % Change   (Cdn $ billions) % Change
Agricultural and Exports 3.660 3.610 -1.4%   16.251 18.207 12.0%
fishing products Imports 2.785 2.828 1.5%   13.242 13.974 5.5%
Balance 0.875 0.782 -10.6%   3.009 4.233 40.7%
Energy Exports 9.587 9.170 -4.3%   46.223 50.858 10.0%
products Imports 4.145 4.298 3.7%   21.661 22.203 2.5%
Balance 5.442 4.872 -10.5%   24.562 28.655 16.7%
Forestry Exports 1.812 1.779 -1.8%   9.424 8.964 -4.9%
products Imports 0.225 0.217 -3.6%   1.025 1.084 5.8%
Balance 1.587 1.562 -1.6%   8.399 7.880 -6.2%
Industrial goods* Exports 9.359 9.338 -0.2%   46.457 47.210 1.6%
and materials Imports 8.217 8.208 -0.1%   39.269 41.302 5.2%
Balance 1.142 1.130 -1.1%   7.188 5.908 -17.8%
Machinery and Exports 6.703 7.286 8.7%   31.703 34.242 8.0%
equipment Imports 10.884 10.746 -1.3%   50.608 53.741 6.2%
Balance -4.181 -3.460 -17.2%   -18.905 -19.499 3.1%
Automotive  Exports 5.486 5.397 -1.6%   24.153 27.651 14.5%
Products Imports 6.800 6.853 0.8%   29.199 33.227 13.8%
Balance -1.314 -1.456 10.8%   -5.046 -5.576 10.5%
*Industrial goods include metals and minerals.
N/A or "not applicable" is when the signs don't match or the per cent is too high.
Data source: Statistics Canada (based on seasonally adjusted current dollar monthly figures).
Table: Reed Construction Data - CanaData.


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