Internatonal

US INTERNATIONAL TRADE
Industry Analysis

Created by Maryna Pavlenko

ABSTRACT

Foreign trade has always been an important factor determining a countrys economic health and
welfare. There is no country in the world that would be self-sufficient in its products and services. Due to some
economic, climatic or environmental reasons, different countries can offer the things that others do not have.
That is why international trade will always be the right solution for balancing states production deficit and
surplus.
The US is a big player in the international arena of trade. It is considered as one of the most active
participants of import and export trade. The US has an access to its natural resources, developed industrial
production, as well as good infrastructure and advanced technologies. Thus, the country uses that for its benefit
and formed up a big network of foreign distribution channels. International interaction helps to accelerate
economic growth and to enhance the Gross Domestic Product. Regardless that, in 2015 the USA earned a trade
deficit, as its imports overweighed exports. Trade imbalance negatively affects the country in the way that it
accumulates more debts than earnings.
The forecast reports, that the leading positions in trade with the US are going to be taken by the same
foreign partners: Canada, China, Mexico. Although Asia and Latin America demonstrate all the signs for
potential replacement of Germany, UK, and Japan.

EXPORT AND IMPORT IN THE US

It will not be overstating to say that
import and export embraced the
world. Some countries would not be
Imports
able to survive if it were not for
55%
import and export. It is a wellknown fact that no country can
survive all alone without interaction
with others. People need to engage
in an exchange of different goods be
Exports
it finished or semi-finished goods or
45%
Trade Deficit
raw materials. The technological
advances have a lot to offer to the
foreign trade making it more simple
and efficient. The goods exchange is focused on moving the goods from where they are in abundance to the places
where there are high demands on them. Foreign trade can be considered as one of the hottest ventures of the 21st
century. Data for 2015 shows that the US generated $4.99 trillion in international trade, where 2.23 trillion in exports
and $2.76 trillion in imports of both goods and services. The US was one of the worlds largest exporters along with
China and the European Union, and it is the worlds largest importer.

INTERNATIONAL TRADE IN 2015

WHAT DOES THE UNITED STATES EXPORT?

Billions of Exported Goods and Services

Corn
Meat and poultry
Soybeans
Gem diamonds
Gold
Government contracts
Cell phones
Plastic
Medical equipment
Fuel oil
Telecommunications
Electric apparatus
Semiconductors
Industrial machines
Petroleum products
Pharmaceuticals
Financial services
Chemicals
Airline fares and other transportation
Commercial aircraft
Intellectual Properties, royalties and license fees
Automobiles
Travel companies
$0

$20

$40

$60

$80

$100 $120 $140 $160 $180 $200

TOP EXPORT PARTNERS OF THE US

TRADE DEFICIT

Canada

Passenger cars, new and used

Parts and accessories of vehicles
Trucks, buses and special purpose vehicles
Industrial machines, other
Petroleum products

Mexico

Parts and accessories of vehicles

Computer accessories
Electric apparatus
industrial supplies
Petroleum products

China

Soybeans
Passenger cars, new and used
Civilian aircraft, engines, equipment, and parts
Semiconductors
Industrial machines

Japan

Civilian aircraft, engines, equipment, and parts

Medicinal equipment
Pharmaceutical preparations
Industrial machines
Meat, poultry

Germany

Passenger cars, new and used

Civilian aircraft, engines, equipment, and parts
Pharmaceutical preparations
Chemicals
Medicinal equipment

Depending on whether a country imports more than it

exports, it can have a trade deficit. The trade deficit took
place in the US trade in 2015 where it imported $532 billion
of goods or services more than it exported. Despite the fact
that America exports billions in oil, automotive products,
and consumer goods, it imports significantly more. For the
most part, the US trade deficit is caused by automobiles and
consumer goods. In 2015, America imported about $596
billion in medications, clothing, consumer electronics, and
other household items. Meantime, it only exported $198
billion, making a $397 billion deficit. The United States
imported $348 billion worth of trucks, automobiles, and
auto parts while exporting only $152 billion, creating a
shortage of $197 billion. Intensive trade exchange with
China causes as much as minimum 40% of the total US
deficit in goods. The good part is that the USA becomes less
dependent on foreign oil. The year of 2015 marked import
of $180 billion in petroleum-related products.

Therefore, the US is facing trade deficit which weakens the

countrys economy for it is financed with debts. The
country buys more than it makes. Furthermore, it loses its
competitiveness on the global market scale. Financing goods purchase overseas for a long period; American
manufacturers lose expertise and factories to make those goods. The less competitive a country is, the higher
unemployment rate is, and the worse its standard of living.
ASSESSING A FOREIGN MARKET FOR EXPANSION
Government/regulatory. The regulatory environment of the country plays a crucial role while considering a new
market for expansion. Specifically, the United States searches for a stable government with transparent trade policies
and where all the procedures are nondiscriminatory and are based on relevant globally recognized best practices. A
legal framework to solve trade disputes is fundamental in the choosing a potential export partner.
Trade Barriers. Tariff or non-tariff barriers determine the level of trade engagement between the countries as it
directly affects the profitability of the parties. It is also essential to meet packaging and labeling requirements.
Otherwise, a product can be barred from a foreign market. Along with high tariffs and quotas, every country has a
limit access to its retail sector. It is usually reflected in unreasonable standards and quality control requirements or
logistical demands and penalties.
Labor force. The quality and skill level of the potential workforce of a new market is critical in the decision-making
process. The country should be able to undertake for training and developing the workers, efficiently managing supply
chain operation.
Infrastructure. Developed infrastructure is a necessary aspect of successful foreign operations. The efficient logistic
solutions are dependent on electricity and IT infrastructure. Some countries expertise poor infrastructure which poorly
affects the distribution of a product within the country.

Demand. While choosing a new trade partner it is essential to study its market which comprises of consumer needs,
the number of consumers, products produced and demanded by the market.
Climate and Location. Super cold or opposite, dry and moist climate can affect the product operation. It is important
to identify which conditions are required to transport and store a product in a foreign country. Sometimes the shipping
costs of some goods may eliminate a profit etc.
Competition. The level of Competition may be too strong to enter the new market. So your decision will be
determined by the following factors: quality, price, distribution channels, and consumer loyalty. Smaller market with
little or no competition would be more attractive and promising.
Environmental Concerns. Environmental standards may dramatically differ from country to country. Product
importation is dependent on environmental pollution requirements. If a product doesnt meet them, it can be ceased
from the market.
Intellectual Property Protection. Intellectual property law should be enforced in the country of your new market.
Some developing countries have a weak protection of intellectual property rights so many violations may occur there.
The World Trade Organization and the United Nations issue the reports on that which should be closely studied before
getting involved into it.
Currency Convertibility. Poor conversion or insufficient currency reserves make a country insolvent. Therefore,
trade in such countries should be avoided. It is important to consider possible currency fluctuations that may affect
your profit and even initiate a loss.
Cultural Knowledge. Global competition addresses the importance of understanding the buyers culture and
traditions. Businesses which develop polite correctness and tolerance to other cultures have more chances for
successful relationships in other countries. It is recommended to customize a product, its design, logo, or even taste to
other cultures. What is well sold in one country may not work for the other. The world is diverse, with different tastes
and preferences which should not be disregarded. The studies also show that multi-cultural staff is beneficial for
businesses, it demonstrates goodwill, and minimize problems in operating business overseas.
PROSPECTS FOR THE US EXPORT
Sector contribution to increase in exports
Top 5 Hotlist Export Destinations
Rank

2014

2030

Canada

Canada

Mexico

China

China

Mexico

Japan

Korea

UK

Brazil

According to the HSBC Bank forecast, Asia and Latin America demonstrate the best potential for American
exporters who are looking for growth and expansion. Trade is expected to increase thanks to transport equipment and
4

industrial machinery. Asia shows high business opportunities in construction and manufacturing, whereas Latin
America is attractive by its retail and wholesale. In 2014 Canada was the largest US export partner and hottest
destination for its export goods. Regardless NAFTA agreement favorable for Canada, and its proximity to the United
States, Canada finds fast-growing Asian countries as its main competitors for the American market. HSBC Bank
reports that Canada may remain the leading position all the way through 2030. The USA show a tendency to increase
its export trade with China by 9% a year on average in the decade to 2030. By that time China may replace Mexico as
the second largest market for US exporters.
WHAT DOES THE US IMPORT?

Billions of Imported Goods and Services

Finance and insurance services
Pharmaceutical preparations
Telecommunications and semiconductors
Computers and related equipment
Apparel and footwear
Food
Cell phones and TVs
Oil and petroleum products
Travel and transportation services
Automobiles
$0

$50

$100

$150

$200

$250

$300

$350

$400

TOP IMPORT PARTNERS OF THE US

CHINA

computers
optical and
medical
equipment
apparel
fabric
textiles

CANADA

oil
gas
uranium
MEXICO

GAPAN

high-end
automobiles
GERMANY machinery
equipment
pharmaceuticals

manufactured
products

fuel-efficient and
reliable
automobiles
machinery
medical
instruments
aircraft
parts

What makes these countries so successful?

Import partners of the US demonstrate their advantages in high quality, focus, and low cost. Some countries like
India or China have a lower standard of living, their labor costs are not that high as in the US, making its products
compatible and attractive for foreign markets. They are more efficient in producing the things consumers need than
American manufacturers.
Canada: NAFTA agreement made possible for Canada to become number one importer of the United States. Trade
between NAFTA countries has tripled since 1994.
Mexico: Another country hugely benefits from its NAFTA agreement. It is Mexico. 78% of Mexican exports go to
the US. Most of the Mexican exports are manufactured products.
Japan: Part of Japanese success lies in the low value of its currency. So its products are more competitive in the
American market. It made Japan one of the largest lenders of the US.
Germany: Germany is world known for its high-quality products. Almost every country has demands for high-end
automobiles that Germany has to offer, and America is not an exclusion.
Some products can be produced or grown only in one country, and they find a demand in foreign markets: Chilean
sea bass, Mexican bananas, or French wines or croissants.
Although America has big reserves of oil, it consumes more than it produces. So its imports surpass its exports of
oil. Also, some grades of oil are not high enough for U.S. consumption, and so are shipped to other countries that
can use them.
PROSPECTS FOR THE US IMPORT

Sector contribution to increase in imports

Top 5 Hotlist Import Origins

Rank

2014

2030

China

China

Canada

Canada

Mexico

Mexico

Japan

Japan

Germany

India

HSBC reports that such Asian countries as India, China, and Vietnam are expected to become top suppliers
of the US imports. India may potentially replace Germany as a fifth leading supplier of the US by the year of 2030.
China is supposed to grow its imports to America by 7% annually through 2020 and account for 20% of total U.S.
imports.
Globalization triggers the expansion of international trade. It becomes more and more important today to
make new connections worldwide and explore foreign markets. International collaboration is beneficial for individual
companies as well as countrys economy. It stimulates production, and satisfies more demanding consumers tastes;
it generates profits and enhances national GDP. A country that can offer low-cost, high-quality products with effective
logistical and regulatory solutions can win the worlds growing competition.

BIBLIOGRAPHY

1) The Balance, retrieved November 18, 2016, from

https://www.thebalance.com/search?q=potential+us+exporter
2) U.S. Census Bureau serves America, retrieved November 18, 2016, from https://www.census.gov/foreigntrade/balance/c1220.html
3) HSBC Global Connections, retrieved November 18, 2016, from
https://globalconnections.hsbc.com/global/en/tools-data/trade-forecasts/us
4) Container shipping and trade news and analysis, retrieved November 18, 2016, from http://www.joc.com/