Beneath the surface “recovery” in global trade, exports to the U.S. are far below their 2008 levels. That means mercantilist exporting nations have seen their national income decline.
Americans have gotten so used to trade deficits of hundreds of billions of dollars a year that we haven’t noticed that imports have fallen significantly from their peak in 2008.
Total imports fell from $2.538 trillion in 2008 to $1.947 trillion in 2009–a decline of almost $600 billion. That means the nations which export goods to the U.S. received $600 billion less from the U.S.
Unsurprisingly, that decline in sales to the U.S. is one reason for a slow-growth global economy, as many of the top exporting countries struggle with tepid demand.
Let’s start with the essential import: oil.
Oil imports totaled $234 billion in 2008, and $215 billion in 2009–roughly 10% of all the goods and services the U.S. imported. While oil is the lifeblood of all advanced economies, including the U.S., its share of imports when measured in dollars is rather modest.
The largest category is goods, which totaled $2.139 trillion in 2008 and $1.575 trillion in 2009–a whopping $564 billion decline.
While the focus of foreign trade is often on China, our biggest trading partner is Canada.
In 2008, the U.S. imported $335.6 billion from Canada and exported $261.4 billion to our northern neighbour, for total trade of $596.9 billion–our number one trading partner with 17.6% of all trade. U.S.-Canada trade was more than our total trade of $409.2 billion with China ($337.8 billion in imports and $70 billion in exports). Our other major trading partners were Mexico ($367.5 billion in total trade) and Japan ($205.8 billion in total trade).
Here are the 2008 import figures:
Canada $335.6 billion
China $337.8 billion
Mexico $215.9 billion
Japan $139.2 billion
Germany $97.6 billion
Canada $224.9 billion
China $296.4 billion
Mexico $176.5 billion
Japan $95.9 billion
Germany $71.3 billion
Taking a closer look at trade with China, here are the figures for exports, imports and the trade deficit for 2008 and 2009:
exports to China: $69,732.8
imports from China: $337,772.6
trade deficit: $-268,039.8
exports to China: $69,496.7
imports from China: $296,373.9
trade deficit: $-226,877.2
China’s surplus with the U.S. declined by $42 billion in 2009.
Clearly, all of our trading partners suffered major declines in their exports to the U.S.
While both exports and imports with China are on the rise in 2010–imports from China rose $18 billion while exports climbed $10 billion–total imports are still considerably lower than in 2008.
What effects has this massive reduction in imports to the U.S. had on our trading partners?
The Chinese government combated the global slowdown in their nation’s exports by ramping up a massive domestic stimulus package that counteracted not just the drop in China’s exports but its real estate slump and weak domestic consumer demand.
Germany, which is heavily dependent on exports to other E.U. nations as well as to China and the U.S., has admitted it needs to boost domestic demand to compensate for declining exports, even as it resists calls to boost its own imports.
Japan is in a slow-growth slump as exports weaken.
Canada posted a lower trade surplus than expected in April as the soaring Canadian dollar crimped the value of exports and goods shipped to Europe fell by a quarter, but domestic demand remains strong.
The data shows Canada’s consumer continues to underpin the country’s economy, while export growth is relatively weak, economists said. They expect net exports to continue to lag as domestic demand for goods rises at a faster pace.
With the exception of Canada, the low-growth prospects for major exporting nations make sense: the more dependent a nation is on its exports, the weaker its growth will be as the U.S. trims its imports by hundreds of billions of dollars annually.
The mercantilist strategy which has underpinned export-dependent economies for the past 60 years is finally running out of steam, and endless debt-based domestic stimulus is not a sustainable substitute.