Chronicling 100 Years of the U.S. Economy

April 2021
Volume 101, Number 4

U.S. International Transactions

Fourth Quarter and Year 2020

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The U.S. current-account deficit, which reflects the combined balances on trade in goods and services and income flows between U.S. residents and residents of other countries, widened by $7.6 billion, or 4.2 percent, to $188.5 billion in the fourth quarter of 2020 (chart 1 and table A). The revised third-quarter deficit was $180.9 billion.

The deficit was 3.5 percent of current-dollar gross domestic product (GDP), up from 3.4 percent in the third quarter.

The $7.6 billion widening of the current-account deficit in the fourth quarter primarily reflected an expanded deficit on goods and a reduced surplus on services that were partly offset by a reduced deficit on secondary income.

The U.S. current-account deficit widened by $167.0 billion, or 34.8 percent, to $647.2 billion in 2020. The deficit was 3.1 percent of current-dollar GDP, up from 2.2 percent in 2019.

 

Exports of goods and services to, and income received from, foreign residents increased $40.8 billion, to $840.0 billion, in the fourth quarter (charts 2 and 3 and table B). Imports of goods and services from, and income paid to, foreign residents increased $48.3 billion, to $1.03 trillion (charts 2 and 4 and table C).

Trade in goods

Exports of goods increased $30.9 billion, to $387.5 billion, and imports of goods increased $36.4 billion, to $640.5 billion. The increases in both exports and imports reflected increases in nearly all major categories. The increase in exports was led by industrial supplies and materials and capital goods, and the increase in imports was led by industrial supplies and materials; automotive vehicles, parts, and engines; and consumer goods.

Trade in services

Exports of services increased $3.8 billion, to $168.1 billion, mainly reflecting increases in travel, primarily other personal travel, and in transport, mostly air freight and air passenger transport. Imports of services increased $6.9 billion, to $115.1 billion, mostly reflecting increases in travel, primarily other personal travel, and in transport, primarily sea freight transport.

Primary income

Receipts of primary income increased $7.1 billion, to $248.4 billion, and payments of primary income increased $7.5 billion, to $200.5 billion. The increases in both receipts and payments mainly reflected increases in direct investment income, mostly earnings, and in portfolio investment income, mostly income on equity securities.

Secondary income

Receipts of secondary income decreased $1.0 billion, to $36.0 billion, reflecting a decrease in private transfers, mostly private-sector fines and penalties, that was partly offset by an increase in general government transfers, primarily taxes on income and wealth. Payments of secondary income decreased $2.4 billion, to $72.4 billion, reflecting decreases in private transfers, mostly private-sector fines and penalties, and in general government transfers, mostly international cooperation.

Capital-transfer receipts decreased $344 million, to $11 million, in the fourth quarter (table A). Third-quarter transactions reflected the U.S. Department of State’s sale of a property in Hong Kong. Capital-transfer payments increased $0.3 billion, to $1.3 billion, reflecting an increase in investment grants.

Net financial-account transactions were −$262.4 billion in the fourth quarter, reflecting net U.S. borrowing from foreign residents.

Financial assets

Fourth-quarter transactions increased U.S. residents’ foreign financial assets by $149.8 billion (charts 5 and 6 and table D). Transactions increased portfolio investment assets, primarily debt securities, by $82.1 billion; other investment assets by $47.8 billion, resulting from large and partly offsetting transactions in loans and deposits; direct investment assets, primarily equity, by $17.5 billion; and reserve assets by $2.4 billion.

Liabilities

Fourth-quarter transactions increased U.S. liabilities to foreign residents by $414.8 billion. Transactions increased portfolio investment liabilities, mostly equity securities, by $301.4 billion; direct investment liabilities, primarily equity, by $71.3 billion; and other investment liabilities, mostly currency and deposits, by $42.1 billion.

Financial derivatives

Net transactions in financial derivatives were $2.6 billion in the fourth quarter, reflecting net lending to foreign residents.

The U.S. international transactions statistics for the third quarter have been updated to incorporate newly available and revised source data (table E). In addition, the statistics for the first three quarters of 2020 have been updated to align the seasonally adjusted statistics with annual totals.

The $167.0 billion widening of the current-account deficit in 2020 mostly reflected reduced surpluses on primary income and on services and an expanded deficit on goods (chart 7).

Exports of goods and services to, and income received from, foreign residents decreased $578.3 billion, to $3.23 trillion in 2020. Imports of goods and services from, and income paid to, foreign residents decreased $411.3 billion, to $3.87 trillion (charts 8 and 9 and table F).

Trade in goods

Exports of goods decreased $217. 3 billion, to $1.44 trillion, mainly reflecting decreases in capital goods, mostly civilian aircraft, engines, and parts, and in industrial supplies and materials, mostly petroleum and products. Imports of goods decreased $166.1 billion, to $2.35 trillion, mainly reflecting decreases in industrial supplies and materials, mostly petroleum and products, and in automotive vehicles, parts, and engines, mainly passenger cars, that were partly offset by an increase in nonmonetary gold.

Trade in services

Exports of services decreased $183.7 billion, to $692.1 billion, and imports of services decreased $130.1 billion, to $458.3 billion. The decreases in both exports and imports mainly reflected decreases in travel, mostly other personal travel, and in transport, mostly air passenger transport.

Primary income

Receipts of primary income decreased $177.4 billion, to $958.3 billion, mostly reflecting decreases in direct investment income, mostly earnings; in other investment income, primarily interest on loans and deposits; and in portfolio investment income, mostly income on equity securities. Payments of primary income decreased $122.6 billion, to $776.7 billion, mostly reflecting decreases in direct investment income, mostly earnings, and in other investment income, primarily interest on loans and deposits.

Secondary income

Receipts of secondary income increased $0.1 billion, to $142.0 billion, reflecting an increase in private transfers, mostly insurance-related transfers, that was mostly offset by a decrease in general government transfers, mostly government-sector fines and penalties. Payments of secondary income increased $7.4 billion, to $289.1 billion, reflecting increases in private transfers, mostly insurance-related transfers, and in general government transfers, primarily international cooperation.

Net financial-account transactions were −$743.6 billion in 2020, reflecting net U.S. borrowing from foreign residents (table G).

Financial assets

Transactions in 2020 increased U.S. residents’ foreign financial assets by $763.5 billion. Transactions increased portfolio investment assets, mostly equity, by $350.2 billion; other investment assets, mostly loans, by $251.0 billion; direct investment assets, mainly equity, by $153.3 billion; and reserve assets by $9.0 billion.

Liabilities

Transactions in 2020 increased U.S. liabilities to foreign residents by $1.50 trillion. Transactions increased portfolio investment liabilities, mainly equity securities, by $760.0 billion; other investment liabilities, primarily deposits, loans, and currency, by $531.4 billion; and direct investment liabilities, mostly equity, by $212.4 billion.

Financial derivatives

Net transactions in financial derivatives were −$3.3 billion in 2020, reflecting net borrowing from foreign residents.