When Trump is talking about the US trade deficit with the EU, for example, he is only talking about the goods/manufacturing sector. He conveniently forgets to mention that goods are only half of the story. The other half is the services sector, represented primarily by US companies like Microsoft, Google, Amazon, etc.
In addition, let's not forget that every time a European tourist stays at a U.S. hotel, for example, the money spent is counted in the services export basket. And every time someone in Canada or Japan or Mexico pays to listen to music or watch movies and television shows made in the United States, they are adding to America’s surplus in the services trade.
Many of the countries that the United States is targeting for tariffs run a services deficit with the United States, including Canada, China, Japan, Mexico and much of Europe, according to the U.S. Census Bureau.
That the US has a trade surplus in the services sector is frequently overlooked in this discussion. Trump's fixation on manufacturing as the only source of good jobs is a generation or two out of date. Ergo, trade surpluses in the services sector also matter. The US, unlike Germany, for example, is not a manufacturing economy anymore, but a service economy.
FYI, here is another perspective based on an excerpt from the European Union Commission's report on EU-US trade in goods and services:
"Millions of jobs in the United States are related to EU-US trade and investment. The European Union is a reliable source of critical supplies to the United States, including medicinal ingredients and pharmaceutical products, advanced machinery and equipment, and aerospace parts and components. At the same time, the European Union is the largest buyer of the United States’ natural gas and oil, which is an important element for ensuring transatlantic energy security and to allow a shared strong response to Russia’s military aggression against Ukraine.
- EU-US goods and services trade is balanced: the difference between EU exports to the US and US exports to the EU stood at €48 billion in 2023; the equivalent of just 3% of the total trade between the EU and the US.
- The total bilateral trade in goods reached €851 billion in 2023. The EU exported €503 billion of goods to the US market, while importing €347 billion; this resulted in a goods trade surplus of €157 billion for the EU.
- Total bilateral trade in services between the EU and the US was worth €746 billion in 2023. The EU exported €319 billion of services to the US, while importing €427 billion from the US; this resulted in a services trade deficit of €109 billion for the EU.
- The EU and the US are also major investment partners. EU and US firms have €5.3 trillion worth of investment in each other’s markets (2022 data).
- US exports of goods and services to the EU support 2.3 million jobs in the US, and EU firms’ investments in the US employ 3.4 million people."
Hence when Trump said on Sunday that "They don’t take our cars. They don’t take our food products. They don’t take anything. And we take their cars: Mercedes, Volkswagen, BMW. You know, we take their millions of cars. They take no cars. They don’t take our farm product. They don’t take anything." None of this is correct.
I am not against maintaining and supporting a strong manufacturing sector in the US, but a more balanced perspective regarding our trade "deficit" with the EU by including the vital services sector in our discussion would be very helpful, in my opinion.
