According to the Pareto principle (also known as the 80-20 rule), 80% of results are driven by 20% of the underlying factors. For example, Italian economist Vilfredo Pareto noted that 80% of a country’s wealth is held by 20% of the population.
It the 80-20 rule holds true today, then the U.S. government should focus on the top 10 import products described in this article. This approach will maximize results to reduce America’s global trade deficit, which stood at $501 billion at the end of 2009.
According to U.S. International Trade Commission’s Interactive Tariff and Trade DataWeb, that $501 billion deficit is spread over 5,390 import product categories. Each of those 6-digit harmonized tariff code categories had individual trade deficit amounts.
The top 10 import categories described below ran the largest trade deficits by product. Therefore, improvements to the negative balances for these top import products should have the greatest effects in reducing the overall U.S. trade deficit.
Top 10 Import Products Contributing to the U.S. Trade Deficit
In total, the following top 10 imported products added $367.7 billion or 73.4% to the U.S. trade deficit last year. Individual trade deficit amounts were calculated by subtracting America’s total exports for a product category from the total imports for that same product tariff classification code.
- Crude oil … -US$192.6 billion, down 45.2% from 2008 (38.4% of total U.S. trade deficit)
- Cell phones … -$29.8 billion, up 11.5% (5.9% of total)
- Medium-size passenger cars … -$28.1 billion, down 8.4% (5.6% of total)
- Large-size passenger cars … -$26 billion, down 44.3% (5.2% of total)
- Laptop and notebook computers … -$22.8 billion, down 2.2% (4.6% of total)
- Television reception equipment with display … -$17.9 billion, down 6.4% (3.6% of total)
- Medications excluding vaccines … -$17.6 billion, down 8.8% (3.5% of total)
- Light petroleum oil … -$14.7 billion, down 53.2% (2.9% of total)
- Natural gas … -$9.6 billion, down 57.1% (1.9% of total)
- Toys, puzzles and models … -$8.7 billion, down 8.1% (1.7% of total).
Among the top deficit-creating products, only imported cell phones generated a higher deficit amount last year. All other 9 product categories posted percentage improvements as high as the 57.1% cut in America’s natural gas deficit.
U.S. Trade Deficit Cuts by Import Products in 2009
Imported energy products comprised 43.2% of the overall U.S. trade deficit in 2009. To America’s credit, the U.S. was able to significant reduce the trade deficit amounts for crude oil (tariff code 270900), light petroleum oil (271011) and natural gas (271121) by a collective $188.1 billion or 46.5% in 2009.
Imported technology and telecommunications products generated 14.1% of America’s $501-billion trade deficit. Top products from the technology and telecommunications sector include cell phones (851712), TV reception equipment with screens (852872) and small portable computers (847130). The U.S. trade deficit for these high-tech imported goods went up by 1.3 billion or 1.9% last year.
From the automotive sector, imported medium-size passenger cars (870323) and larger passenger vehicles (870324) accounted for 10.8% of the U.S trade deficit. Similar to energy sector improvements, America’s trade deficit for these automotive sector goods fell by $23.3 billion or 30.1% over 2008 statistics.
Imported medicines excluding vaccines or prescriptions (300490) and imported toys (950300) both delivered trade deficit cuts of over 8% in 2009.
Best Opportunities for Trade Deficit Savings by Import Products
Echoing Pareto’s 80-20 rule, the U.S. should continue to focus on decreasing trade imbalances for products that have the greatest impact on America’s overall trade deficit.
This approach can be accelerated by developing American-sourced green energy alternatives. The U.S. increased its production of natural gas in 2009, which by itself decreased America’s natural gas trade deficit by $12.8 billion.
Can U.S. manufacturers integrate the production of technology and telecommunication products with America’s world lead in exporting electronic processors and controllers? If production processes can be integrated within America, this will both create jobs for Americans and reduce the U.S. trade deficit.
Following the 80-20 principle, the U.S. would be wise to relentlessly whittle down the trade deficits for the top 10 import product categories.
Sources: U.S. Census Bureau Foreign Trade Statistics, United States International Trade Commission’s Interactive Tariff and Trade DataWeb and United States International Trade Commission Harmonized Tariff Schedule.
Daniel Workman - A senior business and finance writer who also does French translations, notably international trade and insurance materials.
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