In 2012, the U.S. trade deficit grew by 1 percent to $897.8 billion, as growth observed in merchandise imports exceeded the growth in domestic exports by $10.0 billion. While the modest economic recovery of the past few years continued to contribute to an expansion in overall trade, that expansion was limited. For example, the 4.2 percent increase in U.S. exports and 2.9 percent increase in U.S. imports in 2012 were considerably less than in 2011, when U.S. exports and imports each grew by more than 15 percent. Recent macroeconomic difficulties affecting several U.S. trading partners appear to have curbed global trade expansion.
While growth in the U.S. economy improved somewhat in 2012, it continued to be relatively slow. Real gross domestic product (GDP) rose by about 2.8 percent that year, compared with 1.8 percent in 2011 and 2.4 percent in 2010. In addition to the slowing growth rate of imports relative to exports, GDP growth in 2012 can be attributed, in part, to increases in both private inventory and residential fixed investment, along with smaller reductions in government spending at all levels compared to previous years. At the same time, average U.S. unemployment declined by 0.7 percentage points between 2011 and 2012 to 7.8 percent, the lowest rate since January 2009.
Declining growth rates in U.S. exports in 2012 resulted, in part, from slow growth and recessionary environments in multiple major U.S. trading partners. For instance, both Japan and the euro area fell back into recession in 2011 and 2012, respectively, affecting both large and small trading partners including the United States by weakening import demand.
Japan, however, while still recovering from the effects of the 2011 earthquake, tsunami, and nuclear disaster, experienced real GDP growth of 2.0 percent in 2012, after suffering a 0.6 percent contraction in GDP in 2011. In contrast, the euro area economy moved from GDP growth of 1.5 percent in 2011 to a 0.4 percent contraction in 2012. The real GDP growth rate in other large trading economies, such as Canada, Mexico, Brazil, India, Russia, and China, also fell during 2011-12. Despite the challenging economic climate, however, foreign demand for certain U.S. products, especially transportation equipment, remained strong.
In terms of domestic demand, the growth in value of U.S. imports in 2012 likely reflected appreciation of the U.S. dollar relative to the currencies of other leading markets. The trade-weighted value of the dollar compared to the nominal Broad Index was 2.7 percent higher, on average, in 2012 than in 2011. Appreciation relative to major trading partners implies a decline in the cost of imports, though this effect may have been muted by slow growth throughout the global economy.
As will be discussed in the next section, U.S. demand for transportation equipment and electronic products was relatively high in 2012, reflecting the continued U.S. economic recovery, increased consumer optimism, and greater credit availability. On the other hand, overall import growth was moderated by significant reductions in both the value and quantity of key commodities within the energy-related products sector, including crude petroleum and petroleum products. Reasons for these declines varied, but included near-record domestic production of these commodities and reduced U.S. demand.