Tr-mp tariffs expose US weak flank in services

[usonian]

https://www.reuters.com/breakingviews/trump-tariffs-expose-us-weak-flank-services-2025-04-29/


Translation: "We don't understand it, so it doesn't exist."

Services dominate the U.S. economy, accounting for more than 70% of the country’s economic activity, opens new tab last year, according to the Bureau of Economic Analysis. Much of that stays inside the country: you cannot, as trade economists are fond of pointing out, export haircuts. Nevertheless, a decent chunk crosses the border. Last year, the United States exported services worth $1.1 trillion to the rest of the world, while importing $812 billion. The U.S. trade surplus in services has exceeded $200 billion every year for over a decade. That’s very different from the picture in goods, where the U.S. last year received items worth $3.3 trillion from other countries, while shipping $2.1 trillion in products abroad.

Chart showing: The US has maintained a persistent surplus in services trade
The one at the link scales well, so I'm not copying it here.

Measuring services trade is inevitably fuzzy. It is easier to track smartphones or soya beans than to monitor the movements of tax advisers or Hollywood movies. Foreign students and tourists spending money in the United States, for example, count as exports of U.S. services. Robert Lighthizer, who was U.S. Trade Representative during Trump’s first term in office, argues that a significant chunk of the country’s services surplus consists of royalties for intellectual property. “Royalty payments are often part of a U.S. tax-avoidance scheme that has no positive effect on our employment or the well-being of our country,” he wrote in “No Trade is Free, Changing Course, Taking on China, and Helping America’s Workers.”


However, there is also evidence that the trade statistics understate the global power of American services. Most big U.S. multinational companies have subsidiaries overseas that supply local clients. These entities disguise the fact that much of the value embedded in a software package, medical treatment or television series originated elsewhere.

To capture this activity, the U.S. Bureau of Economic Analysis calculates how much U.S. multinationals collect from overseas buyers through local subsidiaries, and how much the U.S. units of foreign firms gather from stateside customers. This “hidden” services trade is substantial: U.S. companies charged more than $2 trillion for services through overseas affiliates in 2022 - the last year for which data is available - while their foreign-owned counterparts earned about $1.5 trillion in the United States. Combine these “hidden figures” with the official trade data, and the U.S. surplus in services could be roughly three-quarters of the size of the U.S. goods deficit that Trump considers so unfair.

[highplainsdem]

1. K&R!