History of the U.S. Trade Deficit

In 1975, U.S. exports had exceeded foreign imports by $12,400 million, but that would be the last trade surplus the United States would see in the 20th century. By 1987, the American trade deficit had swelled to $153,300 million. The trade gap began sinking in subsequent years as the dollar depreciated and economic growth in other countries led to increased demand for U.S. exports. But the American trade deficit swelled again in the late 1990s. Once again, the U.S. economy was growing faster than the economies of America's major trading partners, and Americans consequently were buying foreign goods at a faster pace than people in other countries were buying American goods. What's more, the financial crisis in Asia sent currencies in that part of the world plummeting, making their goods relatively much cheaper than American goods. By 1997, the American trade deficit $110,000 million, and it was heading higher.

American officials viewed the trade balance with mixed feelings. Inexpensive foreign imports helped prevent inflation, which some policy-makers viewed as a potential threat in the late 1990s. At the same time, however, some Americans worried that a new surge of imports would damage domestic industries. The American steel industry, for instance, fretted about a rise in imports of low-priced steel as foreign producers turned to the United States after Asian demand shriveled. And although foreign lenders were generally more than happy to provide the funds Americans needed to finance their trade deficit, U.S. officials worried that at some point they might grow wary. This, in turn, could drive the value of the dollar down, force U.S. interest rates higher, and consequently stifle economic activity.

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This article is adapted from the book "Outline of the U.S. Economy" by Conte and Carr and has been adapted with permission from the U.S. Department of State.