Introduction
Understanding the Gross Domestic Product (GDP) and primary foreign trade concepts is critical in economics. It allows experts to analyze countries’ financial performance and estimate the impact of international relationships on economies. Furthermore, thoroughly examining these parameters helps understand year-over-year changes and make thoughtful decisions on economic policies. Ultimately, the current paper thoroughly analyzes the GDP and foreign trade data of the United States.
GDP Discussion
The GDP is the value of a country’s services and goods over a certain period. It consists of four primary spending types, including consumption, government spending, investments, and net exports, and can be calculated with the formula GDP = C + G + I + NX (Conrad, 2022). In the United States, the real GDP has been consistently increasing since the pandemic’s peak in the second quarter of 2020, except for a slight decrease in the first and second quarters of 2022 due to international political instability (“News release,” 2023). However, it is critical to examine all four parameters of the GDP to gain more valuable insights.
The U.S. Bureau of Economic Analysis presents detailed information about all financial metrics for further analysis via National Income and Product Accounts (NIPA) tables. Table 1.1.5 shows that the GDP is increasing consistently, with the largest gap from 2020 to 2021 (“Selected NIPA Tables,” 2022).
Further analysis shows three of the four parameters (C + I + NX) were significantly lower in 2020 than seasonally adjusted rates in 2021 and 2022. This phenomenon is the largest change of note, transparently demonstrating the financial burden of the COVID-19 pandemic. During 2020, people consumed less, fewer investments, and exports/imports were heavily restricted.
Government spending was the only parameter that was mostly unchanged (“Selected NIPA Tables,” 2022). The federal expenditure on national defense and nondefense purposes changed from 1,501.8 in 2020 to 1,565 in 2021 (in billions of dollars). This gap is significantly smaller than the differences in the other three parameters during this year-over-year period; for comparison, personal consumption increased from 14,047 to 15,741 billion dollars.
Another significant note change is the shift in net exports during the 2020-2021 period. Although the country had a lower financial loss in 2020 (-651.2) compared to 2021 (-918.2), this difference is misleading (“Selected NIPA Tables,” 2022). Table 4.1 shows that the gap occurred due to significantly lower import expenditure with fewer goods and services brought into the country. The likely cause of this phenomenon was heavily restricted air traffic during the pandemic and the associated decrease in personal consumption.
Hence, although the net export was seemingly better in 2020, detailed tables transparently show the real causes of the statistics. In summary, the GDP consistently increased in 2020-2022 in the United States, with 2020 being the largest outlier due to the impact of the pandemic.
Foreign Trade Discussion
Consequently, the U. S. Bureau of Economic Analysis provides information on foreign trade, allowing for analysis of international relationships and macroeconomic policies. The top four trading partners were Canada, Mexico, Japan, and the United Kingdom (“International trade in goods and services,” 2022). In this context, China is the outlier since its position has changed drastically since 1999. In 1999, the U.S. primarily imported from China, but the exports were significantly lower than those of the top-four countries and Germany.
However, within one ten-year period (1999-2009), China became a critical trading partner, significantly surpassing every other nation in imports and nearly equaling Japan in exports. As a result, in 2009, the top five partners were Canada, Mexico, China, Japan, and the United Kingdom, and this structure remained the same in 2021.
Considering the trade balance, there were slight changes in the quantity of exports and imports, but the composition was mostly unchanged. The United States imported significantly more than it exported, particularly in foreign trade with China and Mexico (“International trade in goods and services,” 2022). Moreover, imports from China and Mexico increased significantly during the examined period.
Several outliers in the context of composition include Canada and “other countries,” which are all trading partners not included in the table. Namely, during the first ten-year period, the United States primarily imported from these nations; however, from 2009 to 2019, the trade balance was equal or even favored exports (“International trade in goods and services,” 2022). Overall, the quantity of imports has been growing steadily, significantly surpassing exports, with China (-334,769 million dollars in 2021) and Mexico (-111,521) being the most notable contributors to this trade balance composition.
Conclusion
The GDP and foreign trade data remain key metrics of financial performance that can provide helpful information for economists. The current analysis of the GDP has shown that the pandemic restrictions have had a substantial negative impact on consumption, net exports, and investments. At the same time, government spending was the least affected parameter. Consequently, examining foreign trade has revealed the continuous increase in import quantity and the notable change in the U.S.-China trade relationship since 1999. Ultimately, analyzing key financial metrics is an effective method of understanding economic trends and policies.
References
Conrad, C. A. (2022). Applied macroeconomics: A practical introduction. Springer.
International trade in goods and services. (2023). Bureau of Economic Analysis: U.S. Department of Commerce. Web.
News release. (2023). Bureau of Economic Analysis: U.S. Department of Commerce. Web.
Selected NIPA tables. (2022). Bureau of Economic Analysis: U.S. Department of Commerce. Web.