Stuck at a $700 Billion Deficit
The high price that the United States is paying for foreign oil is making it very hard to achieve much success in reducing the foreign trade deficit. In April 2008, the annualized deficit in the trade of goods and services jumped up again to $730 billion from $680 billion the month before, according to the latest report from the U.S. Census Bureau. The average level of the trade deficit over the past year-and-a-half has been $700 billion.

Furthermore, the goods-alone deficit has been creeping upward. The overall deficit has been bailed out, to a degree, by the surplus in services. The surplus in services, although it is relatively small ($144 billion in the latest month), has doubled over the past two years. A big part of this increase has been due to travel, with Americans traveling less outside the country and more foreigners coming for a visit. The U.S. dollar downshift has been a factor, as has been the new requirement for more official documentation when exiting and returning to the U.S.

The Importance of the Trade Figures for Construction
One follows the trade figures because they are a key component of Gross Domestic Product (GDP) and because they give an indication of what is happening in terms of activity levels and employment prospects in key industries. Job growth and profits eventually drive investment decisions.

Success in Export Markets in Three Product Areas
Essentially, there are three product areas where the U.S. is having success in export markets at this time. A couple of these are in natural resources, most notably agricultural products and metals and minerals. The following ranks commodities by the year-to-date dollar volume of the surplus, exports over imports, through April 2008.

• In agricultural products: soybeans (a $6.4 billion surplus); corn ($4.8); wheat ($3.5); animal feeds ($2.2); and meat and preparations ($2.0).
• Metals and minerals: metal ores and scraps ($6.0); non-monetary gold ($5.7); and coal ($1.0).
• Manufacturing: airplanes and airplane parts ($17.1); plastics ($7.2); specialized industrial machines ($4.8); and scientific instruments ($2.2).

Major Product Areas with Trade Deficits

Product areas where the U.S. is in trade deficit can also be broken down into several key groupings, with energy being by far the most significant. The shortfalls in energy overwhelm all other categories.

• In energy products: crude oil (-$109.2 billion, as the measure of imports over exports through April); petroleum preparations (-$14.0); and natural gas (-$9.6).
• Manufacturing: vehicles (-$37.6); electrical machinery (-$9.5); and iron and steel mill products (-$5.2).
• Low-cost producers overseas: TVs, VCRs, etc. (-$32.4); clothing (-$22.8); data processing equipment and office machines (-$22.2); furniture and bedding (-$9.1); toys, games and sporting goods (-$6.4); footwear (-$6.1); textile yarn and fabric (-$3.3).  

Some Interesting International Groupings
As a final comment on the U.S. trade deficit, it can be separated into three major geographic regions internationally. While these are arbitrary and artificial, they do prove useful in a “rule of thumb” sort of way. The split is approximately one-third each for: (1) China (currently 28% of the total deficit); (2) OPEC and the Euro area combined (31%); and (3) Canada, Mexico and Japan combined (30%).

Another interesting way of looking at the international breakdown is to combine the countries and regions that supply the U.S. with energy – i.e., Canada, Mexico and OPEC. This yields over 40% of the U.S. total trade deficit.

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