In a previous post, we looked at a list of America’s biggest trade deficits and China was at the top. But China is a very big country with one fifth of the world’s population – more than four times the population of the U.S. Sheer size alone accounts for much of that deficit. But which countries, man-for-man (or person for person, if you prefer) do the most damage to the U.S. economy by siphoning away manufacturing jobs through a big trade imbalance? To determine that, we need a list of our worst trade deficits in per capita terms. So here is a list of our twenty worst per capita trade deficits in 2019: Top 20 Per Capita Deficits, 2019.
Little Ireland is at the very top of list, with a $9,615 per capita surplus in manufactured goods with the U.S. that is nearly three times the size of the next worst on the list – Switzerland. If we assume that an average manufacturing job pays $50,000 per year, and that two thirds of the cost to manufacture something is labor, then the math tells us that for every eight citizens of Ireland an American citizen has lost his/her job. Thankfully, there are only 5.2 million people in Ireland, so the damage done to the American economy’s manufacturing sector by Ireland is limited to “only” 650,000 jobs. But think of that. America has lost 650,000 manufacturing jobs to tiny Ireland. No wonder Ireland is the wealthiest nation on the list – significantly more wealthy than the U.S. in terms of purchasing power parity (or “PPP”).
The list is noteworthy for other reasons.
- This list is dominated by wealthy countries. The average PPP of the nations on this list was almost $38,000 in 2018. The average of the top ten on this list is almost $47,000 – on a par with the U.S. It’s the same phenomenon we saw on the list of our biggest deficits in absolute dollar terms. Clearly, low wages play no role at all in driving our trade deficit.
- Exactly half of the nations on this list are members of the European Union. Another, Switzerland, is a European country, though not a member of the EU.
- On average, America’s per capita trade deficit with these twenty nations has grown by 148% over the past ten years, led by Vietnam and Slovakia. Only one has declined – Israel. (All of that decline has happened in the past two years.)
- Noteworthy for its absence from the list is China. China has been on the list every year since I began publishing this list in 2010, though near the bottom of the list. But this year they’re gone, falling to number 25. Why? Because of the effect that Trump’s tariffs on China have had on reducing the trade deficit with them.
The most noteworthy takeaway from this list, however, is this: with only three exceptions, the nations on this list are very densely populated. The average population density of these twenty nations is 524 people/square mile – more than 5-1/2 times as densely populated as the United States. Regardless of whether we look at the balance of trade in absolute dollar terms or in per capita terms – no matter how we look at it – population density pops out as the overriding factor in driving trade imbalances.
In the case of Ireland, it must be recognized that there is another factor. Ireland is a tax haven for companies. They get a free ride in Ireland. It’s a grossly unfair trade practice designed to siphon companies away from the U.S. It’s unbelievable that the U.S. continues to turn a blind eye to this shake-down. Ireland is growing rich at America’s expense.
Before we explore exactly why population density is such a huge factor, we’ll take a look at the other end of the spectrum – our best trade partners in 2019 – the nations who, man-for-man, are the best customers for American-made products. That’ll be the subject of the next post. Stay tuned.