In discussions of US international economic ties, it sometimes feels a bit as if the only other country worth mentioning is China. Daniel Hamilton at the Brookings Institution put together a list of US international economic ties in a short essay “Who is America’s top commercial partner? (Hint: It’s not China.)” (March 21, 2024). Here’s a table from his article:
The first column shows trade in goods, which is measured by adding exports and imports to and from the US and the other economy. China is behind the European Union, which is perhaps not a surprise, but also behind Canada and Mexico. But of course, trade in goods is only one part of international commercial relations, and not the fastest-growing part. International trade in services is often conducted online, and here the volume of US-EU trade really stands out (especially if one adds in U.K.).
The third column of “foreign affiliate sales” measures the sales by, say, EU-affiliated firms in the United States and US-affiliated firms in the EU. The rule-of-thumb is that “affiliation” means at least 10% ownership of the company. This category of firm is often involves in offshoring/onshoring decisions: that is, if a company has a foreign affiliation, it will decide on which location to carry out production and hiring for various tasks. Here, US connections with the EU (and the UK) are especially strong.
The final column shows “foreign direct investment,” which is the amount of investment by those in one country in which they own at least 10% of a firm in the other area. (The 10% threshold is chosen because it implies a “large enough” ownership share to provide a voice in how the company is run.) Again, the numbers in the table are the sum of, say, US foreign direct investment in the EU and EU foreign direct investment in the US. In this area, US-China ties are smaller than US-Mexico ties, and either of those is a small fraction of the ties from the US economy to Canada, the UK, and the EU.
I won’t try to draw out any implications or lessons here. I’ll just say that when thinking about or discussing how international economic ties affect the US economy, it’s useful to have some magnitudes in mind.
