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Ranked: Visualizing the Largest Trading Partners of the U.S.

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U.S. Largest Trading Partners

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Ranked: The Largest Trading Partners of the U.S.

The U.S. economy grew 5.7% in 2021, the fastest pace since 1984, bouncing back from the economic downturn created by the pandemic. But as supply chain issues reared their head and international restrictions came in and out of play, how did the country’s trade situation shape up?

America’s trade deficit of goods shot up to a whopping record $1.1 trillion in 2021 from $922 billion in 2020, leading to its largest ever deficit. Imports dwarfed exports, reaching new highs of $2.9 trillion in 2021, while U.S. exports to other countries added up to $1.8 trillion.

Using the latest data on international trade from the U.S. Census Bureau, we’ve visualized the flow of America’s annual imports and exports for selected countries. The difference between the two measures is the country’s trade deficit for goods.

Who Does the U.S. Trade Most With?

In 2021, U.S trade of goods amounted to nearly $4.6 trillion and Canada, Mexico, and China were America’s largest trading partners. Those three countries alone combined for a total trade of $1.9 trillion, equal to about 41% of all trade of goods.

Let’s take a look at the 10 countries that trade the most with the United States:

RankU.S. Trade PartnersGoods Imports
(in billion U.S. dollars)
Goods Exports
(in billion U.S. dollars)
Total Trade
(in billion U.S. dollars)
#1🇨🇦 Canada$357.2$307.6$664.8
#2🇲🇽 Mexico$384.7$276.5$661.2
#3🇨🇳 China$506.4$151.1$657.5
#4🇯🇵 Japan$135.1$75.0$210.1
#5🇩🇪 Germany$135.2$65.2$200.4
#6🇰🇷 South Korea$95$65.8$160.8
#7🇬🇧 United Kingdom$56.4$61.5$117.9
#8🇹🇼 Taiwan$77.1$36.9$114
#9🇮🇳 India$73.3$40.1$113.4
#10🇻🇳 Vietnam$101.9$10.9$112.8
Total$2.85 Trillion$1.76 Trillion$4.61 Trillion

From a geographic perspective, the two largest trading partners are based in North America (Canada and Mexico). Meanwhile, six of the top 10 are based in Asia.

Which Countries Does the U.S. Have the Largest Trade Deficit With?

The largest trade deficit is undoubtedly with China, which accounts for more than 32% of the U.S. trade deficit in goods.

The $355 billion deficit with China comes from importing $506 billion in goods such as machinery, furniture, and bedding. Interestingly, many of those imports are made by American companies who outsource their production to China. These outsourcing activities are counted as imports even though they create profit for these U.S. companies.

Below we order U.S. trade partners by trade deficit of goods:

RankU.S. Trade PartnersGoods Trade Deficit
(in billion U.S. dollars)
#1🇨🇳 China$355.3
#2🇲🇽 Mexico$108.2
#3🇻🇳 Vietnam$91.0
#4🇩🇪 Germany$70.1
#5🇯🇵 Japan $60.2
#6🇮🇪 Ireland$60.2
#7🇨🇦 Canada$49.5
#8🇲🇾 Malaysia$41.0
#9🇹🇼 Taiwan$40.2
#10🇮🇹 Italy$39.3
Total Deficit$1.09 Trillion

The second largest U.S. trade deficit is with Mexico with $108 billion. The main imports from Mexico are cars, trucks, and auto parts. On the other side, the main exports are auto parts and petroleum products.

How Does a Trade Deficit Affect the U.S. Economy?

The U.S. has been running trade deficits since the late 1970s, so these latest numbers are a continuation of a long-term trend. Are these trade deficits a bad thing? The simple, unsatisfying answer is, it depends.

When any country spends more money on imports than it makes on exports, it must somehow make up the shortfall. Typically, this means takes the form of borrowing from foreign lenders or allowing foreign investment in domestic assets. In the U.S., the trade imbalance with China is a sore point, as millions of jobs in manufacturing have been lost due to offshoring in recent decades.

That said, running a trade surplus is no guarantee of strong economic performance. Germany is a prime example of a country with a massive trade surplus, but achieving only modest economic growth in recent years.

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Beyond Big Names: The Case for Small- and Mid-Cap Stocks

Small- and mid-cap stocks have historically outperformed large caps. What are the opportunities and risks to consider?

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A line chart showing the historical return performance of small-, mid-, and large-cap stocks.

 

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The following content is sponsored by New York Life Investments
An infographic comparing low-, mid-, and large-cap stocks, including an area graph showing historical returns, a bubble chart showing how much $100 would be worth over 35 years, a horizontal bar graph showing annualized volatility, and a line graph showing relative forward price-to-earnings ratios, that together show that mid-cap stocks present a compelling investment opportunity.

Beyond Big Names: The Case for Small- and Mid-Cap Stocks

Over the last 35 years, small- and mid-cap stocks have outperformed large caps, making them an attractive choice for investors.

According to data from Yahoo Finance, from February 1989 to February 2024, large-cap stocks returned +1,664% versus +2,062% for small caps and +3,176% for mid caps.  

This graphic, sponsored by New York Life Investments, explores their return potential along with the risks to consider.

Higher Historical Returns

If you made a $100 investment in baskets of small-, mid-, and large-cap stocks in February 1989, what would each grouping be worth today?

Small CapsMid CapsLarge Caps
Starting value (February 1989)$100$100$100
Ending value (February 2024)$2,162$3,276$1,764

Source: Yahoo Finance (2024). Small caps, mid caps, and large caps are represented by the S&P 600, S&P 400, and S&P 500 respectively.

Mid caps delivered the strongest performance since 1989, generating 86% more than large caps.

This superior historical track record is likely the result of the unique position mid-cap companies find themselves in. Mid-cap firms have generally successfully navigated early stage growth and are typically well-funded relative to small caps. And yet they are more dynamic and nimble than large-cap companies, allowing them to respond quicker to the market cycle.

Small caps also outperformed over this timeframe. They earned 23% more than large caps. 

Higher Volatility

However, higher historical returns of small- and mid-cap stocks came with increased risk. They both endured greater volatility than large caps. 

Small CapsMid CapsLarge Caps
Total Volatility18.9%17.4%14.8%

Source: Yahoo Finance (2024). Small caps, mid caps, and large caps are represented by the S&P 600, S&P 400, and S&P 500 respectively.

Small-cap companies are typically earlier in their life cycle and tend to have thinner financial cushions to withstand periods of loss relative to large caps. As a result, they are usually the most volatile group followed by mid caps. Large-cap companies, as more mature and established players, exhibit the most stability in their stock prices.

Investing in small caps and mid caps requires a higher risk tolerance to withstand their price swings. For investors with longer time horizons who are capable of enduring higher risk, current market pricing strengthens the case for stocks of smaller companies.

Attractive Valuations

Large-cap stocks have historically high valuations, with their forward price-to-earnings ratio (P/E ratio) trading above their 10-year average, according to analysis conducted by FactSet.

Conversely, the forward P/E ratios of small- and mid-cap stocks seem to be presenting a compelling entry point. 

Small Caps/Large CapsMid Caps/Large Caps
Relative Forward P/E Ratios0.710.75
Discount29%25%

Source: Yardeni Research (2024). Small caps, mid caps, and large caps are represented by the S&P 600, S&P 400, and S&P 500 respectively.

Looking at both groups’ relative forward P/E ratios (small-cap P/E ratio divided by large-cap P/E ratio, and mid-cap P/E ratio divided by large-cap P/E ratio), small and mid caps are trading at their steepest discounts versus large caps since the early 2000s.

Discovering Small- and Mid-Cap Stocks

Growth-oriented investors looking to add equity exposure could consider incorporating small and mid caps into their portfolios.

With superior historical returns and relatively attractive valuations, small- and mid-cap stocks present a compelling opportunity for investors capable of tolerating greater volatility.

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