Trade by Sector
How important are manufactured goods in U.S. trade?
In 2019, the United States exported $1.4 trillion in manufactured goods and imported $2.2 trillion, creating a merchandise trade deficit of $793 billion. U.S. manufactures exports accounted for 54% of total U.S. exports of goods and services and 70% of total U.S. imports of goods and services. Manufactures share of U.S. exports fell 4 percentage points over the past decade, as the services export share expanded; manufactures share of U.S. imports expanded by 7 percentage points. Top U.S. exports and imports by subsector included transportation equipment, computer and electronic products, chemicals, and machinery.
Sources: U.S. Census Bureau and Bureau of Economic Analysis. Note: Manufactured goods based on North American Industry Classification System (NAICS) commodity codes
Is the U.S. manufacturing sector shrinking due to increased trade?
The growth of global value chains has transformed U.S. manufacturing in certain industries, with the expansion of production that requires advanced technology but relatively less labor. As a result, for many products, labor-intensive activities like assembly have moved abroad, while activities such as design, product development, and distribution increasingly drive the U.S. manufacturing process. Reports of factory closings and layoffs, such as at the Carrier plant in Indiana and GM factories in the Midwest, and labels indicating merchandise made in China, Mexico, or other countries, have reinforced the perception that the U.S. manufacturing sector is shrinking. Many experts consider relative changes in output and employment, among other metrics, to examine the health of the sector. Such data paint a mixed picture. The United States has seen a long-term decline in employment in manufacturing. At the same time, manufacturing output has increased, reflecting increased productivity, with fewer workers needed for a given level of production. While the sector’s importance relative to the economy and relative to services in terms of value-added as a share of GDP has declined, manufacturing remains a significant component of the U.S. economy.
Sources: Bureau of Labor Statistics and Bureau of Economic Analysis. Note: Annual values are averages of monthly data.
Falling employment and the declining importance of physical production in the manufacturing process are not unique to the United States and have occurred in most advanced economies. Although some changes in the sector may be a result of factors specific to the United States, others may be due to changes related to technology, consumer preferences, or broader macroeconomic factors. The role of trade has been widely debated. Some estimate that increased imports from China contributed to the steep decline in U.S. manufacturing employment in the 2000s; others estimate that job loss in manufacturing was substantially offset by job gains in services, due to the expansion of U.S. exports globally. Others contend that trade has played a less dominant role compared to automation and other factors. Taking a broader view, a fundamental restructuring of the U.S. manufacturing sector was underway for more than two decades prior to China joining the World Trade Organization (WTO).
Measuring manufacturing activity can be challenging, and existing data may not fully capture how manufacturing has changed, the sources of employment, and how value is created (see above). Manufacturing remains a significant component of the U.S. economy by several measures, for example, U.S. manufacturers account for more than 60% of all private-sector research and development (R&D), and more than half of U.S. exports. While the U.S. share of global manufacturing value-added has declined, the United States remains a top global manufacturer.
How important are agricultural goods in U.S. trade?
In 2019, the United States exported $136 billion in agricultural goods and imported $131 billion, creating a trade surplus of $5 billion—a surplus that has narrowed in recent years. U.S. agricultural exports accounted for 8% of total U.S. goods exports and 5% of total U.S. goods imports. Agriculture’s share of total U.S. exports has fallen slightly over the past decade, while the import share remains on trend. Although small relative to trade in manufactured goods, trade remains a significant component of the U.S. agricultural sector, with exports accounting for about 20% of total farm production by value. Foreign markets are a major outlet for many agricultural goods; for example, cotton and soybeans rely on other countries for absorbing over three-fourths and half of U.S. output, respectively. According to the U.S. Department of Agriculture, imports of certain products, such as coffee, cocoa and spices, fish, and juices, accounted for a large share of U.S. food consumption in recent years.
What is trade in services, and how is it different from goods trade?
“Services” refers to an expanding range of economic activities, such as audiovisual, construction, computer and related services, energy, express delivery, e-commerce, financial, professional, retail and wholesaling, transportation, tourism, and telecommunications.95 Services not only function as end-use products, but they also facilitate the rest of the economy. For example, transportation services move intermediate products along global value chains and final products to consumers; telecommunications services open e-commerce channels; and financial services provide credits for the manufacture of goods. Intermediate services embedded within a supply chain can include R&D, design and engineering, and business services.
As with trade in goods, foreign barriers may prevent U.S. trade in services from expanding to its full potential, but services barriers are often different from those faced by goods suppliers. Many barriers to goods trade—tariffs and quotas, for example—are at the border. By contrast, restrictions on services trade occur largely within the importing country as “behind the border” barriers. Some restrictions are in the form of discriminatory regulations that may favor domestic service providers over foreign service providers. Because services transactions more often require direct contact between the consumer and provider, many of the trade barriers faced by companies relate to the ability to establish a commercial presence in the consumers’ country in the form of direct investment or to the temporary movement of providers and consumers across borders.
How important are services in U.S. trade?
In 2019, the United States exported $876 billion in services and imported $588 billion, creating a trade surplus of $287 billion. U.S. services exports accounted for 35% of total U.S. exports of goods and services, while services imports accounted for 19% of total U.S. imports. As services account for over 80% of U.S. employment and 79% of U.S. GDP, trade in services, both as exports and as inputs to other exported products, can have a broad impact across the U.S. economy. Unlike trade in goods, each year the United States exports more services than it imports, thus surpluses in services trade have partially offset U.S. trade deficits in goods trade.
Conventional trade data may underestimate trade in services because the data are not measured on a value-added basis and do not attribute any portion of the traded value of manufactured and agricultural products to services inputs. Intermediate services embedded within a value chain as inputs include not only transportation and distribution to help move goods along, but also R&D, design and engineering, and business services. The independent value of these services (as opposed to the value of the final product) can be captured in trade in value-added statistics. As manufacturing and agriculture grow more complex and technologically advanced, their consumption of value-added services also grows.
How is digital trade different from other trade in goods and services?
Digital trade includes not only end-products such as movies, software, or video games; it also serves as a means to facilitate economic activity, potentially enhancing productivity and competitiveness. Examples of digital trade include online shopping; transmission of information to manage business operations; online health or educational services; communication channels, such as email; and financial services used in e-commerce or electronic trading. Information and communication technologies (ICT) services are outpacing the growth of trade in ICT goods.
As with traditional trade barriers, digital trade constraints can be classified as tariff or nontariff barriers. Nontariff barriers establish restrictions that may affect what a firm offers in a market or how it operates. Because digital trade is intangible and does not require direct interaction between individuals, trade barriers are often in the form of localization requirements that restrict the flow of commercial data. Digitally delivered exports and services in particular rely on cross-border data flows. But trade in manufactured goods and agricultural products also increasingly depends on data flows. For example, farmers may use real-time satellite data to optimize the productivity of crops and soil. Data transfer regulations that restrict cross-border data flows or require use of locally based servers or infrastructure, so-called data localization barriers, may limit the type of services that a firm can sell or how it can communicate and share data with subsidiaries or headquarters abroad. Such restrictions may also prevent the ability of providers that offer or rely on cloud-computing from entering a market.
The COVID-19 pandemic, with social distancing enforcement, lockdowns, and other measures, demonstrated the increasing importance of digital trade, and led to spikes in both business-to-consumers and business-to-business digital trade. The growth reflected a surge in online shopping, social media use, internet telephony, teleconferencing and teleservices (such as education and medicine), and streaming of videos and films. Analysts expect that many of the digital habits and practices that consumers and workers developed during the pandemic will continue and accelerate technology adoption, further spurring digital trade.