If you guessed China, India or Brazil, you’d be wrong.
In the aftermath of the deepest economic downturn in 75 years, the United States has emerged as the latest global export powerhouse. Until recently, our biggest export has been our toxic debt.
Now the world has been gobbling up everything from American-made computer chips to potato chips. The chief destination for all of these products with the “Made in the U.S. A.” label has been Asia. Overseas demand for U.S.-made products like Apple’s iPad has been so great that domestic orders for this latest high tech “gotta-have” are backlogged several months.
According to the latest Commerce Dept. figures, U.S. exports to China, the third biggest market for American-made goods, were up 47 percent in the first quarter this year from the first three months of 2009. Shipments to South Korea, the seventh-largest importer of American-made goods, increased 66 percent during the same period.
Along with American industrial manufacturers, the Dept. of Agriculture beefed up it projections showing that U.S. farmers and ranchers are poised to achieve $104.5 billion in export sales — $8 billion more than last year. Fueling the higher number were record agricultural sales of $59 billion in the first half of the fiscal year.
Why Our Exports Have Risen
Asia is now forecast to surpass the Western Hemisphere as the largest regional market for U.S. exports. For agriculture, China was the top market during the first six months of the fiscal year, purchasing $10.6 billion of U.S. farm products.
In large measure, the weaker U.S. dollar explains the surge in U.S. exports. But that’s only part of the story.
The recession has forced many manufacturers to rethink and retool in order to survive. In an effort to trim costs and increase efficiency, many U.S. manufacturers have reduced their workforce, eliminated non-performing product lines and slashed prices to make their products more competitive in the global marketplace.
Companies like Palo Alto-based Hewlett-Packard Co. and Cisco Systems, Inc. are boosting their sales forecasts in anticipation of stronger demand for semiconductors, computers and software in the world’s fastest-growing economies.
Domestically, General Motors may be like a boxer stumbling to stay on his feet. In China, G.M. is a contender. The Chinese love their Chevys. With increased prosperity, the Chinese are quickly becoming the next soccer-mom market clamoring for G.M. made minivans and SUVns. Exports to Asia, South America and even Europe are the top growth market for G.M. Trade Deficit Jumps
Several major U.S. manufacturers have converted their cost-saving measures into new, more efficient equipment. Higher energy and raw material costs have also forced many manufacturers to embrace techniques previously eschewed that increase their overall efficiencies. U.S. stockholders are also demanding that companies do more with less.
Despite this growing renaissance in domestic manufacturing, the U.S. trade deficit rose to a 15-month high as soaring oil prices pushed crude oil imports to the highest level since the fall of 2008, offsetting another strong gain in exports. The larger deficit is also evidence of steadily increasing consumer demand and a rebounding U.S. economy. The Commerce Dept. reported that the trade deficit rose 2.5 percent to $40.4 billion in March compared to the February imbalance. It was the largest monthly trade deficit since December 2008.
Analysts expect this year's deficit to be up significantly from 2009, when it hit an eight-year low. With growing demand from Asia, the impact of the European debt crisis on American exports may be only marginal.
U.S. manufactures are also applauding a recent Commerce Department move to relax restraints on high tech imports to China. Current laws restrict the export of hundreds of high tech civilian products to China that have potential military uses. Although both sides would deny it, these export restrictions have also been a sticking point in the ongoing negotiations between Washington and Beijing over revaluation of the Chinese currency which now pegged to the U.S. dollar.
Presently, manufacturing accounts for 11 percent of our economy, down from 12.3 percent in 2006. Over the last two quarters, export manufacturing has contributed to more than half of the expansion, helping the economy to its best six-month performance since 2003.
The expansion is not without risks. Sovereign debt concerns in Europe could impede demand. A falling euro also could increase the competitiveness of European exports.
In the meantime, the “Made in U.S.A.” logo has a new spring in its step.
John Cohn is a senior partner in the Globe West Financial Group based in West Los Angeles. He may be contacted at www.globewestfinancial.com
