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

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.