We saw in my previous post that the list of America’s twenty worst trading partners in 2019, in terms of per capita trade deficit in manufactured goods, was dominated by very densely populated countries. Only three of the twenty were less densely populated than the U.S. Now we’ll look at the other end of the spectrum. Man-for-man (or person-for-person), which countries buy the most American-made products? Here they are: Top 20 Per Capita Surpluses, 2019.
While the average population density of our worst trading partners is 524 people/square mile, the average population density of our best trading partners is 208 people/square mile. The list includes some very large and very small countries. The combined population density, the total population of these countries divided by their total land mass, is only 20 people/square mile. The list also include seven net oil exporters. As discussed in an earlier post, it’s almost automatic that the U.S. has a trade surplus with oil exporters because all oil world-wide is priced in U.S. dollars. It leaves those countries with no choice but to buy American products in order to use those dollars. America’s biggest source of imported oil is Canada, so that factors into their position high up on this list, but the bigger factor is their very low population density – only eleven people/square mile.
Once again, The Netherlands and Belgium appear on this list in spite of their very high population density, but that’s an anomaly caused by their position as the only port on the Atlantic-side of Europe and how exports from and imports into that port are booked.
The average increase in our trade surplus with these nations over the past ten years is only 36%. That barely keeps pace with the rate of inflation, meaning that our trade surpluses have been stagnant, while the trade deficits with our worst trading partners has risen by 148% over the same time period.
The average purchasing power parity (or “PPP”) of the nations on this list is $43,900. Take away tiny Oman, the wealthiest nation on earth (and one of the smallest), and the average drops to $39,600 – almost exactly the same as the average for our twenty worst trade partners. Clearly, how rich or poor a nation is (or how high or low their workers’ wages) has no bearing on the balance of trade. Whether we have a trade surplus or trade deficit with any given nation is determined almost solely by population density (and also whether a nation is an oil exporter). To drive home that point, in my next post we’ll look at our balance of trade with the poorest, lowest-wage nations vs. the wealthiest, highest-wage nations. The results are an eye-opener.