Macroeconomic and Global Growth Influences on the U.S. Agricultural Trade Balance

The U.S. agricultural trade surplus has recently declined to the lowest levels since the early-1970s, raising concerns that it foreshadows a longer term trend of waning foreign demand and greater import dependency. However, analysis of two key factors affecting agricultural trade suggests that the current downward trend in the trade balance may not continue. First, differences in global growth rates and consumption levels are leading to a major shift in the direction of U.S. exports, with the share of exports going to high income markets declining in favor of fast-growing developing markets. Consequently, U.S. export growth could accelerate in the coming decade due to rising per capita incomes and food expenditures in these markets. Second, the U.S dollar may continue to depreciate if foreign capital inflows subside, which would further spur U.S. export growth and dampen imports. Results are supported by analysis conducted with dynamic U.S. computable general equilibrium and static global trade models.