Overview. 2016 business reports show that U.S. exporters exported $2.2 trillion worth of goods and services. This was about 12% of total economic output in GDP terms. Keep in mind that only 1% of American businesses export their products. Based on the report, the U.S. is the 3rd largest exporter in the world right behind China and the EU, with Germany coming in at fourth place. This is a slight drop in total U.S. market share both in actual terms and as a percentage of global exports. Most of America’s exports are goods as well as service sector based products. The intangible nature of services makes them harder to export across countries and regions.
Top U.S. Exports
$1.46 of the $2.21 trillion exported items comprised of goods and items. This means two-thirds of what America exported were commodities. The products fall into seven categories. These are capital goods, industrial supplies & equipment, consumer goods, automobiles, agricultural products, and services.
- Capital Goods. A little over $500 billion worth of capital goods were exported mostly from 6 broad categories. These are Industrial machines ($51 billion), Commercial Aircraft ($121 billion), and Medical equipment ($35 billion). The others are telecommunications ($41 billion), semiconductors ($44 billion), and Electric apparatus ($42 billion).
- Industrial supplies and equipment. In 2016 the U.S. exported $398 billion worth of materials used. Most of these are oil and oil-based products. Chemicals topped the list followed by fuel oil, then petroleum products, and plastic. Non-monetary gold closed this list at $20 billion.
- Consumer goods. These constitutes 13% of the goods exported valued at about $200 billion. The breakdown is pharmaceuticals ($53 billion), cell phones ($24 billion) and gem diamonds ($21 billion). Consumer spending is influenced by disposable income, income per capita, living wage, household debt, consumer expectations and inflation rates
- Automobiles. These constitute 10% of the exported goods and services averaging about $150 billion. GM, Chrysler, and Ford are the largest cars manufacturers. There are a few smaller ones also in the market. The output has been growing significantly after taking a dip during the 2008 financial crisis.
- Agricultural products. At $131 billion this is one of the largest products exported from the U.S. markets. They tend to be generally cheaper since they receive lots of government subsidies. Bioengineering and chemical additives have helped to boost production and supply of agricultural products. Soybeans ($24B), Meat and poultry ($17B) and Corn ($11B) are the top three exported goods.
- Services. This constitutes one-third of U.S. export to global markets. It totals about $750 billion. Most of the exported services in the exported commodities and items. The largest service export is aircraft services ($293B), Computer & Related services ($178B), Intellectual property and royalties ($120B) and banking ($113B) as well as defense ($20B).
Challenges Facing the United States Exporting Sector
The United States export market has shrunk globally due to the emergence of developing industrial economies like Brazil, India, China, and Indonesia. These countries have developed industrial units that manufacture most of the goods for the local market which in turn lowers demand for American products.
- Secondly is standards of living. These countries have lower standards of living. This allows them to produce goods at a cheaper rate. The lower standards of living enable them to erode America’s competitive and comparative advantages across lots of industries. When it comes to automobiles Japanese, and European car makers producers better quality and cheaper cars that are well suited for global markets.
- Third, is the issue of oil. America is both a huge producer and importer of oil. That’s because they produce a lot yet their demand is even hired. Keep in mind that some of the oil that they produce does not meet their consumption standards, so they export it to Africa. Most of the oil produced is shale oil. America therefore still spends much more on buying oil abroad.
- American Trade Deficit. American trade deficit as of 2016 stood at $500 billion. We imported $2.7 trillion worth of goods and services while exporting $2.2 trillion. This is about $25 billion higher than 2013. This can mostly be attributed to the strengthening of the dollar by 25% between 2013 and 2016. Even then this deficit is $200 billion less than 2006 meaning, the value is on a general upward trend. The primary drivers of this deficit are consumer products (-$397B) and automobile (-200B) deficit.
- The deficit with Major Trading Partners. America’s top trading partners are China ($580B), Canada ($545), Mexico ($525B). The deficit with China stands at about $347B making them responsible for 70% of our deficit. This deficit significantly weakens the economy since the economy ends up being financed by debt which has to be paid back with interest. The dollar is said to have declined 40% between 2001 and 2007. This in turn weakness America’s competitiveness on the global stage.
Opportunities for U.S. Exporters
Despite the challenges, it’s not all gloom and doom. America has certain old and emerging opportunities on the export front. The U.S. exported $2.209 trillion worth of exports in 2016. America has a lot of potential given that this constitutes export from
1% of American firms only.
- The U.S. Dollar Is King. American competitiveness is still pegged on the good fortune of having the dollar as the world reserve currency. This minimizes the shocks that the economy might have to take in the short and medium term. The dollar still accounted for 62% of global bank reserves still ahead of the pond, Euro, Yen, and Yuan. This I good news for small time exporters in the market.
- African Renaissance. The growth and rise of African economies have created a middle class (est. 15% of pop) that has an increasing demand for American goods. Any small or medium-sized exporter who targets this market will greatly benefit. The purchasing power of African consumers haves been on a general upward trend over the past 15 years. Economies of Kenya, Nigeria, South Africa, Ethiopia, Egypt, and Congo continue to prove versatile in the face of internal challenges and shocks. They also have massive infrastructural spending that lifts the nation’s ease of doing business.
- Investors and Technology. The U.S. continues to lead as the most attractive market for investors especially from the developing Asian economies. That’s why the U.S. continues to get hundreds of billions in capital inflows. The Foreign Direct Investment inflows stood at $736B in 2016. That accounts for 15% of the global totals or $1 in every $6. Additionally, people still flock to the U.S. as tech innovators and inventors. It’s still the home to major social players and towers in spending levels.
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