TRADE SURPLUS NATIONS FACE US TARIFF HIT

Returning US President Donald Trump has wasted little time in nominating the primary targets of his economic and trade agenda.
 
Under the Trump administration Mark II, China, Canada, and Mexico all face the threat of higher tariff barriers to export their goods and services to the US.
 
A cursory glance at official US trade statistics underlines why Donald Trump has taken aim at the three nations.
 
For 2022 – the year of the most recent figures supplied by the Office of the US Trade Representative - the US recorded a deficit with China in trade of goods and services of more than US$367 billion.
 
China racked up $562 billion in exports to the US, against $195 billion in imports from the US. But, in the same year, the US posted a services trade surplus with China of almost $15 billion.
 
Closer to home, the US in 2022 recorded a trade deficit of $131 billion with Mexico, while the US trade deficit with Canada exceeded $53 billion.
 
Admittedly, Canada took in a lot of US exports – around $427 billion – while exporting $481 billion in goods and services south of the border.
 
On the trade of services alone, as with China, the US posted a surplus of more than $26 billion with Canada, mostly in the areas of professional and management services, travel, and financial services.
 
In 2022, the US also exported $362 billion of goods and services to Mexico, while importing $493 billion worth from its southern neighbor. Unlike China and Canada, however, Mexico recorded a surplus in goods and in services (albeit small) in its trade with the US.
 
In the same year, the US registered with the European Union an almost identical trade deficit to that of Mexico, excepting of course that the EU comprised 27 countries.
 
The US exported $592 billion of goods and services to the EU, while importing more than $723 billion in return. But while the US recorded a $202.5 billion deficit in goods exports, it chalked up a $71.2 billion surplus in services trade with the EU; as with Canada, the US services exports were chiefly professional and management services, finance services, and intellectual property.
 
One country that will not be in President Trump’s sights as a trade deficit villain is Australia, with whom the US consistently posts trade surpluses.
 
In 2022, the US posted a surplus witin the trade of goods and services of US$27 billion (A$39 billion*), off the back of US exports of $52 billion (A$75 billion), and $25 billion (A$36 billion) in imports from Australia.
 
That total surplus included an estimated $12.7 billion (around A$18 billion) trade surplus in US services, principally in financial services, travel, telecommunications, computers, and information services.
 
Unlike the US, Australia in 2022 posted a sizeable trade surplus with its No.1 trading partner China – A$71 billion (around US$49-50 billion) on goods and services.
 
In 2023, that surplus jumped to A$111 billion (US$73 billion), with mineral-dominant exports of A$219 billion far outstripping the A$108 billion imports from China.
 
Meanwhile, another English-speaking country – and AUKUS partner – was also in the US trade surplus column in 2022: the United Kingdom.
 
The US recorded a total surplus of $20.8 billion in the trade of goods and services with the UK, with US exports totalling $158.2 billion and imports from the UK of $137.4 billion.
 
Both Australia and the UK, however, had lower US-sourced trade deficits than the largest nation in South America: Brazil.
 
In 2022, US exports of goods and services to Brazil surpassed $75 billion, with $45 billon of imports from Brazil. Of the total $30.7 billion trade surplus recorded by the US, the services sector accounted for more than 50 per cent.
 
If Donald Trump proposes a round of multilateral tariffs on imports into the US, it’s safe to assume that Australia, the UK and Brazil will be quick to hold their ground: they know their countries are not the source of sabre-rattling on American trade issues.
 
 
*All figures in US dollars, unless stated. A$-US$ comparisons based on median value of A$ in 2022 and 2023.

Gavin Clancy is a Senior Consultant with Lunik