July 23, 2018
Did you know the United States’ network of major international trade relationships extends significantly beyond its partnership with China?
Given the recent headlines around trade tariffs, retaliatory tariffs, and potential trade wars, it is even more important for Americans to know which countries comprise our network of major trade partners and monitor these relationships.
According to a 2017 examination of data compiled by the U.S. Bureau of Economic Analysis, the European Union trading block is the largest source of U.S. exports, followed by Canada, Mexico, and China sequentially.
When looking at the dollar value of trade imports and exports, we found Canada and Mexico to be the United States’ two most prominent trading partners. Given their neighboring proximity to the U.S., this comes as no surprise.
Current Market Context: U.S. Trade Relations with the European Union, Canada, Mexico, and China
In 2017, the United States exported roughly $341 billion of goods and services to Canada, $276 billion of goods and services to Mexico, but only $188 billion in exports to China. Compared to China, Canada and Mexico are significantly more important markets for U.S. exports and these partners should be taken into account when assessing current trade news and market activity.
China is considered the bogeyman of U.S. trade, due to the fact that China imports more than $523 billion of goods and services to the U.S., a deficit of over $335 billion dollars in 2017.
This extreme trade imbalance is unique to the United States’ trade relationship with China and is not mirrored by U.S. relations with its other major trade partners.
Trump’s Tariff Talk and the Tension Around Trade Negotiations
During his presidential campaign, President Trump made aggressive trade threats to China but withheld a majority of this bold rhetoric when addressing Canada, Mexico, and the EU. Today, however, this reserve has been cast aside as the President continues to use harsh trade rhetoric when addressing the nation’s European and North American trading partners.
The first round of U.S. tariffs imposed $10 to $15 billion worth of tariffs on imported steel and aluminum. In response to the steel and aluminum tariffs imposed by the U.S., Canada introduced $13 billion in Canadian tariffs on American exports. Yes, tensions are high, but industry experts do not believe the tariffs between the U.S. and Canada will dramatically affect the economy of either country as they make up less than 5% of total U.S. exports.
As the scope of these tariffs continues to expand, they could potentially trigger a significant disruption in the global supply chain network. Therefore, as negotiations progress, it is crucial to monitor international trade discussions to better anticipate how they will impact the financial markets.
If you have any questions or concerns, please contact your advisor or a member of the Willis Johnson & Associates team for more information.
Jason Mishaw, MSF
As an associate wealth manager at Willis Johnson & Associates, Jason Mishaw is actively involved in both the Financial Planning role and the Investment Management role. On the financial planning side, he helps to implement customized financial plans for WJA clients. On the Investment Management side, under the supervision of a Senior Wealth Manager, he assesses the financial goals of WJA clients and assists in creating a customized strategy to further those goals. Jason received a Master of Science in Finance at the University of Houston C.T. Bauer College of Business, a B.A. in economics and a B.S. in biochemistry and cell biology from Rice University.
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