While the U.S. buys more goods from abroad than it sells, the opposite is true for services, which include everything from streaming subscriptions to financial advice. Trump left these service exports out of his tariff math, but they are being pulled into his trade wars. Services came to dominate the U.S. economy as the country grew wealthier. It was no longer Ford and General Motors that mattered most, but companies such as Microsoft, Alphabet and JPMorgan Chase. Software and financial products became major U.S. exports. The U.S. services trade surplus grew to $295 billion last year, up from $77 billion in 2000. “When you generate bad will, it’s harder to sell stuff.”
President Trump is wielding tariffs to try to close the massive U.S. trade deficit in goods, which he sees as a sign of economic weakness.
It is only part of the trade story.
While the U.S. buys more goods from abroad than it sells, the opposite is true for services, which include everything from streaming subscriptions to financial advice. Trump left these service exports out of his tariff math, but they are being pulled into his trade wars.
On Wednesday, Trump ratcheted up the U.S. trade war with China, but put broader tariffs above 10% on most other countries on ice for 90 days. Sectoral tariffs such as the ones imposed on automobiles weren’t changed.
Still, the shock of Trump’s globe-spanning tariffs has sent countries scrambling and rocked markets as world leaders adapt to a suddenly much more adversarial trade relationship with the world’s biggest economy.
Countries can’t easily impose tariffs on services, but they can tax, fine or even ban U.S. companies. The European Union has floated going after big U.S. tech companies in response to Trump’s sweeping tariff threats. Trump also put U.S. service exports at risk by irking foreign consumers, many of whom might choose to avoid U.S. banks, asset managers and other firms. An economic slowdown that curbs demand as markets grapple with the president’s extreme trade makeover won’t help either.
U.S. services imports and exports since 2000, by trading partner
Services surplus
EUROPEAN UNION
Services exports
$300 billion
Services imports
200
CANADA
100
$100 billion
0
0
100
100
2000
’05
’10
’15
’20
200
2000
’05
’10
’15
’20
MEXICO
CHINA
$100 billion
$100 billion
0
0
100
100
2000
’05
’10
’15
’20
2000
’05
’10
’15
’20
For decades, the U.S. and the rest of the world had a deal: Other countries sent cars, phones, clothes and food to the U.S., and in return they got bonds, software and management consultants.
As the U.S. imported more goods from abroad and domestic factories closed, its goods trade deficit swelled to a record $1.21 trillion by 2024. At the same time, the U.S. services trade surplus grew to $295 billion last year, up from $77 billion in 2000. This is a stark reversal from the mid-20th century, when the U.S. was a manufacturing giant and had a goods export surplus, but had a services trade deficit.
Services gradually came to dominate the U.S. economy as the country grew wealthier. It was no longer Ford Motor and General Motors that mattered most, but companies such as Microsoft, Alphabet and JPMorgan Chase. Software and financial products became major U.S. exports. For some of the biggest services firms, foreign markets now matter more than the U.S.
U.S. services exports, by category
Personal travel
Business
travel
Air
Sea
Computer services
TELECOM,
COMPUTER AND
INFORMATION
7%
TRAVEL
18%
TRANSPORTATION
10%
Information
Telecom
Other
modes
Rein-
surance
Professional
and management
consulting services
Financial-management
services
Securities
lending,
electronic
funds
transfer, etc.
Financial
intermed-
iation
INSUR-
ANCE
2%
FINANCIAL
SERVICES
17%
OTHER
BUSINESS SERVICES
25%
Credit-related
services
Brokerage
and market
making
Audio-
visual
services
Research and
development
licensing
Computer software
Research and development
INTELLECTUAL
PROPERTY
13%
GOVERNMENT
3%
Franchises and
trademarks licensing
MAINTENANCE AND REPAIR
CONSTRUCTION
PERSONAL, CULTURAL AND RECREATIONAL
Note: Figures are for 2023, the latest data available with detailed breakdowns.
Source: Commerce Department
Corporate tax-avoidance strategies also pushed services exports higher, said Brad Setser, an economist at the Council on Foreign Relations. Many U.S. companies register profits in other countries where taxes are lower, and then pay fees to their U.S. parents. Those fees are counted as payments for intellectual property or asset management, which are technically services exports. That is why the U.S. runs massive service-trade surpluses with Ireland, Switzerland and the Cayman Islands.
International
Domestic
Mastercard
70.0%
Meta Platforms
63.7
Visa
58.9
Netflix
58.7
Alphabet
51.3
Microsoft
49.1
Oracle
45.1
JPMorgan Chase
21.5
Berkshire Hathaway
18.6
In some of these cases, while the U.S. brings in far more goods from these places than it sends out, it sells more services. The U.S. has a large goods deficit with the EU, for example, but that is at least partially balanced by a services surplus.
And now, EU politicians have hinted that they could target U.S. tech companies in retaliation for U.S. tariffs. “Europe holds a lot of cards, from trade to technology to the size of our market,” European Commission President Ursula von der Leyen said in a speech before Europe’s Parliament last week.
Countries and their consumers can lash out against U.S. services in a variety of ways. Foreign tourists booking American hotel rooms and airline tickets count as U.S. exports, but Trump’s actions have stoked rising anti-American sentiment that is turning off would-be travelers. In another blow, China on Wednesday issued a travel warning for the U.S. There is also the risk of foreign customers’ turning against U.S. brands. Trade tensions with China during the first Trump administration ended up hurting U.S. services firms that do business in the country, said David Weinstein, a professor of economics at Columbia University.
“When you generate bad will, it’s harder to sell stuff,” he said.
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