Further Slippage in U.S. Foreign Trade; Mega Projects to the Rescue?

The U.S. foreign trade deficit deteriorated further in the latest month, sinking to -$972 billion USD in September 2021, an unwelcome record. The trade of goods, which is -$1. 178 billion. The ‘services’ balance, which includes business and tourism travel, plus between-country costs of transporting cargo, remained above water, +$206 billion USD.

Ongoing improvement in’services’ surplus has not been as secure as in past. Uncharacteristically, there have been an equal number (5) of month-to-month declines in the ‘services’ balance so far this year as there have been advances (also 5).

Previously, about half of the U.S. trade surplus was derived from China. That was gradually suppressed to the point where China’s share shrank below 30% in June of this year. Since then, however, China’s proportion has edged back up again, reaching 35.6% in September.

Other nations have offered bigger pieces. From the Euro area, Germany and Ireland held equal portions of the U.S. ‘goods’ trade deficit in September 2021, 5.5% each.

Ireland is such a major trading partner, it’s not surprising. This is mainly due U.S. purchases Irish pharmaceuticals and some ‘potent’recreational beverages.

There are several major U.S. drug companies expanding in the future to supply medicines. In October, Pfizer opened a modular aseptic processing plant in Portage (Michigan).

(In Graph 2, the shares for the individual Euro area countries add to more than the ‘total’ because there are some countries not shown (e.g., Spain and Belgium) where the exports-to-imports balance is in favor of the U.S.)

Table 1 highlights that the U.S. is running a sizable deficit in the foreign trade of motor vehicles and parts, -$149 billion year to date. Nearly half of the shortfall (46.2%) is with Mexico, and about a quarter (24.1%) of the negative gap is with Japan.

America enjoys a small trade surplus in the auto-sector with Canada.

To reduce the imbalance with Japan and go hand-in-hand with increased electric vehicle production, Toyota announced plans to build a battery plant worth a billion dollars at an unnamed US location.

South Korea and Germany are next in line behind Mexico and Japan for shares of the U.S. total trade deficit in motor vehicles and parts, 10.3% and 8.6% respectively.

Texas is the Bandleader in Export Sales

Texas leads the export parade by twirling a baton one mile ahead of the band. Its dollar volume of foreign sales to date in 2021 ($269 billion) has been double what second-place California has been able to achieve ($130 billion) and four times as great as third-place New York has managed ($63 billion).

Texas, fourth-place Louisiana, and others export a lot of oil and gas in various derivative forms. The upcoming major projects for both states had massive extra expenditures for petrochemical plants as well as liquefied natural gases (LNG), facilities.

Lately, and abetted by the COP26 meeting of nations to address climate change, even more of a chill has descended on the notion of further fossil fuel investments.

The Australian government just approved a huge LNG exporting proposal with associated offshore pipeline construction. This is in response to disapproval from the country’s midwestern coast.

Interesting sidebar: Louisiana’s trade story doesn’t revolve around energy. In fact, the state’s major export product in 2021 has been soybeans. China is the state’s largest customer.

Graph 1: United States’ Foreign Trade: Goods and Services Balance – September 2021

In September 2021, the U.S. trade deficit increased (i.e., worsened) both month to month (+11.2%) and year over year (+29.2%).

The last data point is for September 2021.

Based on seasonally adjusted monthly figures, projected at an annual rate.

Data source: Bureau of Economic Analysis.

Chart: ConstructConnect.

Graph 2: Geographic Sources of U.S. Total Foreign Trade Deficit in Goods – September 2021

China used to account for as much as 1/2 of America's total foreign trade deficit in goods each month. Recently, its share has decreased significantly. In Jun '21, the figure fell below 30%. In the latest 3 months, though, it has risen again to 30.5% in Jul, 32.5% in Aug. & 35.6% in Sept.

Data source: U.S. Census Bureau and Bureau of Economic Analysis (BEA).

Chart: ConstructConnect.

Table 1: U.S. Foreign Trade in Motor Vehicles & Parts – September 2021 YTD

The U.S. sizable trade deficit in motor vehicles & parts (-$149 billion ytd) is nearly 1/2 (46.2%) with Mexico and is 1/4 (24.1%) with Japan. (The U.S. is running a surplus with Canada.) For major manufacturers to meet EV  production & sales goals out to 2030-2035, there will need to be huge investments in battery plants, etc.

Data sources: Census Bureau and Bureau of Economic Analysis (BEA).

Table: ConstructConnect.

Graph 3: The 25 Leading States for Goods Exports, Jan-Sept 2021

Ranked by $ Volume (Also Showing YTD % Changes – i.e., vs Jan-Sept 2020)

In the early years of this century, through 2005, Canada and Mexico accounted for about the same share of total U.S. oil imports, around 15% each. Since the mid-00s, though, Canada's proportion has surged ahead while Mexico's has slipped a little.

Data sources: U.S. Census Bureau and Bureau of Economic Analysis (BEA).

Chart: ConstructConnect.

About Alex Carrick

Alex Carrick is Chief Economist for ConstructConnect. He has presented throughout North America about the U.S., Canadian, and global construction outlooks. Mr. Carrick has been with the company since 1985.

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