As President Trump attempts, like many of his predecessors, to cut the U.S. merchandise trade … More
The combined U.S. trade deficit with USMCA trade partners Mexico and Canada now exceeds the U.S. deficit with China, according to my analysis of U.S. Census Bureau data through May released Thursday.
On an annual basis, I can find no evidence that the U.S. deficit with China has ever fallen below that of the combined total for Mexico and Canada, though the Census Bureau data I use only dates to 1992.
Looking at year-to-date data through May, it did happen by the narrowest of margins 23 years ago, the year after China joined the World Trade Organization and its manufacturing might was released on the United States and the world.
That year, the combined total of Mexico’s and Canada’s merchandise trade deficit was a slight 1.02% larger. By the end of the year, the U.S. deficit with China was 17.23% larger – and there was no looking back. Until now.
President Trump has taken aim at U.S. trade deficits like to other U.S. president.
Taming the U.S. trade deficit, a measure of both the American economy’s might and the American consumers’ appetite for consumption, is no easy task, as President Trump and his predecessors of the last three decades have found.
Because the deficit is, indeed, a measure of the America’s economy’s might and the ability of its businesses and consumers to purchase more than the country produces, I do not share the concern – some might say obsessive concern – many place on the U.S. trade deficit.
We pay too little attention to trade in services, including in trying to figure out how to measure the value – and the level of our surplus with the world. This includes tourism and education – visitors and students from abroad, respectively – “services” which are now being damaged. We pay too little attention to the value our restaurant and hotel brands bring. We pay too little attention to the business generated by U.S. companies and their workers once imports reach our shores or borders.
And, getting back to merchandise trade, or the trade in goods, I pay more attention to the relationship between exports and imports, as I wrote recently.
But no president has pulled out the stops like Trump.
With a wide-range of broadsides on industries and countries, beginning in his first term and an exponentially expansive effort in the first months of his second, Trump’s efforts effectively raised the average U.S. tariff from 2.5% to as high as 27% at the April 2 “Liberation Day” announcement, according to one study.
And … yet … the deficit keeps climbing.
Having set a record six of the last eight years – three each for Trump in his first term and President Joe Biden – the 2025 deficit is almost certainly going to blow past the 2022 record of $1.18 trillion. The deficit through May is $606.48 billion.
The U.S. deficit with China remains the nation’s largest.
China’s contribution to that U.S. deficit is $101.96 billion through May. That’s down from $162.47 billion in the first five months of 2022, a decline of 59.34%.
A great deal of that U.S. deficit with China has been swallowed up by Vietnam, now clearly in Trump’s sights, as well as by Taiwan, Japan, India, other Asian nations and, to a limited extent Mexico.
Nevertheless, even though much of China’s manufacturing prowess has simply shifted within the Asian continent, Mexico’s contribution to the U.S. deficit through May is $79.44 billion and Canada’s is $27.38 billion, for a total of $106.82 billion.
The U.S. deficit with Mexico has risen rapidly and is approaching the value of the U.S. deficit with … More
The U.S. deficit with Mexico, less than a third of China’s through May of 2022, is now 77.91 percent as large. (The U.S. deficit with Mexico is almost threee times larger than the U.S. deficit with Mexico.)
Could Mexico’s deficit alone top the U.S. deficit with China at some point? While that was certainly impossible to imagine a few years ago, it doesn’t seem outside the realm of possibility today.
China was the United States’ top trade partner in 2020. Now Mexico is, and has been for the last two years. China was the top importing trade partner into the United States for 15 consecutive years – until Mexico surpassed it in 2023.
As we look to July 9, when President Trump has indicated he will end the pause on his April 2 “Liberation Day” tariffs and begin instituting tariffs on the rest of the world, this creates an additional challenge for his efforts to diminish the U.S. trade deficit.
The challenge, it seems, is closer to home than imagined.
