Question

What happened with the United States Imports/Exports during the Great Recession?

Answer 1

The Great Recession of 2007-09 was characterized in part by a major collapse in international trade. The magnitude of the collapse in U.S. trade was substantially larger than in previous recessions. The 2007-09 recession led to a decrease in trade of more than 25 percent four quarters following the previous business cycle peak, and 11 quarters passed before trade returned to its prerecession levels. During the 2007-09 recession, seven of the top 10 origins for U.S. imports were in recession, while eight of the top 10 export destinations were in recession. Thus, the 2007-09 recession occurred "more globally" from the U.S. perspective than did the 2001 recession; the impact was significantly deeper in the trading partners of the U.S. in 2007-09 than in 2001. From August 2008 through April 2009, U.S. non-petroleum real imports and exports fell about 27 percent, a much more pronounced drop than occurred in production (Alessandria, Kaboski, and Midrigan, 2010). The Great Recession, however, affected some U.S. trade partners more severely than others. Because international trade has become increasingly relevant to the U.S. economy, the country's growth perspectives depend more on the growth performance of its major trade partners (see, e.g., Contessi and Li, 2013). The two poorest U.S. trade partners, Mexico and China, significantly increased their importance as import sources, and their importance as destinations of U.S. exports increased even more. The same situation applies to the aggregate shares for the rest of the world. On the contrary, Canada, Japan, Germany, the United Kingdom, and France lost some of their importance. A main factor behind this shift is likely the performance of the different countries during the Great Recession.

Since the major trading partners of the U.S. were in a recession at the same time as the U.S. in 2007-09, foreign demand for U.S.-produced goods declined, which hurt U.S. exports. Similarly, since production fell in the major economies from which the U.S. imports, total U.S. imports declined. In contrast, in the recession of 2001 only a few of the major trading partners were simultaneously in recession, and the magnitude of the recession in those countries was substantially less severe than in 2007-09. Consequently, the effect on U.S. trade was less severe in 2001.

The magnitude of the collapse in U.S. trade was not merely due to the severity of the U.S. recession. Instead, two forces magnified the trade collapse. First, most of the major trading partners of the U.S. were simultaneously in recession, something that didn't occur in previous downturns. Second, countries are more linked via the global supply chain now than they were in previous recessions.

One of the most interesting features of the Great Recession is that—contrary to other global recessions—it was mostly a rich-country phenomenon. As such, it might have accelerated—but not by much—the long-run growth of the relative importance of emerging markets such as China and Mexico in global and U.S. trade. However, a country's income growth rate can be only part of the story. Both Canada and Germany outgrew the United States in terms of income during the 2007-11 period, and their trade shares with the United States have declined.