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The high-tech trade balance

Importing and exporting U.S. aerospace, nuclear, and weaponry technology

The graph above shows FRED data on U.S. exports and imports of advanced technology products, which include the categories of advanced materials, aerospace, biotechnology, electronics, flexible manufacturing, information and communications technology, life sciences, optoelectronics, nuclear technology, and weapons. A report from the Brookings Institution noted that the advanced technology sector in the U.S. added $143 billion to GDP in 2013-15 and accounted for more than 20 percent of the growth of the economy. Despite the boost from this sector, the graph shows that the U.S. has turned from a net exporter to a net importer of these products. Now, these products are subject not only to market forces but also to export regulations and restrictions. Indeed, U.S. national interests prevent some technologies from being exported to some countries. In any case, this part of the trade deficit is minor compared with the total trade deficit, as shown in the graph below.

How these graphs were created: For the first graph, search for “advanced technology products,” which should give you the two series (exports and imports). Select them and click on “Add to Graph.” For the second graph, start with the first graph, but remove the imports series. Use the “Customize data” section to add that imports series to the first line (the exports series); then apply formula a-b. Add the second line to the graph by searching for and selecting “Trade Balance: Goods and Service, Balance of Payments Basis.”

Suggested by Christian Zimmermann.

View on FRED, series used in this post: BOPGTB, EXP0007, IMP0007

Three views of the U.S. trade deficit

Minding units and considering services

Consider the graph above, which shows the U.S. trade balance. It looks like things are seriously heading south, with a deficit that’s ten times larger than it was 25 years ago. Is it really that bad? For one thing, the economy as a whole has grown significantly over this period, and prices have increased, too. To address these biases, we should divide the trade balance by our favorite nominal index, nominal GDP. The result is the graph below.

Now that the units are percentages of GDP, we can see that the deficit is five times as large as it was 25 years ago, not ten times. And it has actually improved since the previous recession, to a little more than three times its size, topping out at –4% of GDP. But wait, there’s more: International trade doesn’t pertain to goods alone; it also involves services. And here, the United States actually enjoys a surplus. So, if you redo the second graph with the trade balance for goods and services, you obtain the graph below:

Finally, we see that the current trade deficit is at about 3% of GDP. Is that a lot? Actually, a deficit isn’t necessarily bad. See a previous blog post on the topic.

How these graphs were created: For the first graph, simply search for “trade balance” and take the series that pertains only to goods. For the second graph, use the first and then go to the “Edit Graph” panel: From there, add “nominal GDP” and apply the formula a/b/10*12. (The idea is to divide by 1,000 to put both series into the same units and then multiply by 100 to obtain results in percentages, which reduces to simply dividing by 10. Multiplying by 12 changes the trade balance’s monthly frequency to an annual frequency, to match nominal GDP’s annual frequency.) For the the third graph, replace the trade balance for goods with the trade balance for goods and services.

Suggested by Christian Zimmermann.

View on FRED, series used in this post: BOPGSTB, BOPGTB, GDP

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