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Summary

In 2002 the United States incurred a trade deficit in goods of $470.1 billion on a Census basis and $484.3 billion on a balanceof-payments basis (BoP). A surplus in services trade of $49.1 billion gave a deficit of $435.2 billion on goods and services (BoP) for the year. For April 2003, the trade deficit in goods and services decreased to $42 billion from $42.8 billion in March. Overall U.S. trade deficits reflect a shortage of savings in the domestic economy and a reliance on capital imports to finance that shortfall. They are a concern for Congress for several reasons. Financial, budgetary and other policies may affect the size of the trade deficit, while trade and capital flows affect the exchange value of the U.S. dollar. A large overall trade deficit may also indicate that certain U.S. industries are having difficulty competing with imports at home and in markets abroad. This may generate trade friction and pressures for the government to do more to open foreign markets, shield U.S. producers from foreign competition, or assist U.S. industries to become more competitive. Since 1976, the United States has incurred continual merchandise trade deficits. They increased dramatically from $36.5 billion in 1982 to a peak in 1987 at $159.6 billion. The deficit dropped to $74.1 billion in 1991 but rose to $436.1 billion in 2000 and to $470.1 billion in 2002. (Census basis). Much of the improvement in the U.S. trade deficit between 1987 and 1991 resulted from a depreciation of the dollar and the recession in 1990-1991. The multilateral trade-weighted real value of the U.S. dollar reached a high in 1985, then dropped sharply from 1986 through 1988. The worsening of the deficit in 1993-95 can be attributed primarily to the faster recovery from recession in the United States than in Europe or Japan. In 1997-99, the Asian financial crisis caused a sizable fall in U.S. exports to Asia and a marked increase in U.S. imports from Asia as well as rising U.S. imports of capital. In 2002, total U.S. goods trade totaled $1.85 trillion, compared to $1.87 trillion in 2001 and $2 trillion in 2000, with exports of $693 billion and imports of $1,163 billion (Census basis). In 2002, U.S. exports decreased by 4.8%, while imports increased by 2%. The broadest measure of U.S. international economic transactions is the balance on current account. In addition to merchandise trade, it includes trade in services and unilateral transfers. In 2002, the current account deficit jumped to an estimated $503 billion from $393 billion in 2001. After reaching a peak of $160.7 billion in 1987, the current account deficit had fallen steadily through 1991, when it reached a surplus of $3.8 billion, before turning into deficit again. Economic projections indicate that the current account deficit will rise to about $546 billion in 2003. In trade in advanced technology products, the U.S. surplus dropped from $29.6 billion in 1998 to $4.4 billion in 2001. The balance turned to a deficit of $17.4 billion in 2002. In trade in passenger automobiles, the United States has been running a deficit, particularly with Japan, Canada, Germany, and Mexico.

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