What is a net importer?
A net importer is a country that buys more global trade from other countries than it sells to other countries in a given period. Countries produce goods based on the resources available in their region. Whenever a country cannot produce a particular good but still needs it, that country can import that good from other countries that produce and sell that good.
A net importing country can be contrasted with a net exporting country, a country that sells more abroad than it buys.
- A net importer is a country that buys more goods from abroad through trade than it sells abroad.
- By definition, net importers generally have current account deficits.
- As a big consumer country, the United States has been a net importer for decades, with an import deficit of $678.7 billion in 2020.
Understanding Net Importers
A net importer is a country or region that imports more goods and services in value than it exports over a certain period of time. By definition, net importers generally have current account deficits. However, it can also have individual deficits or surpluses with specific countries or regions, depending on the types of goods and services traded, the competitiveness of those goods and services, exchange rates, levels of government spending, trade barriers, etc.
In the United States, the Commerce Department maintains monthly export and import records in a number of tabular displays. According to their aggregate statistics, some of the largest categories of goods currently imported by the U.S. are food and beverages, petroleum, passenger cars, auto parts, pharmaceuticals, cell phones and computers. It is important to note that a country can be a net importer in one area and a net exporter in others. For example, Japan is a net exporter of electronic equipment, but it must import oil from other countries to meet its needs.
Example: United States as a net importer
For decades, the United States, a big consumer, has been a net importer. While the country excels in many of its leading exports of goods and services—airliners, factory equipment, luxury cars, soybeans, movies (Hollywood), and banking services, to name a few—Americans love to buy things, and the surrounding countries the world does Feed the beast. Being a net importer is not necessarily a bad thing, but a chronic and growing trade deficit can create many problems over time.
In 2020, imports exceeded exports by $678.7 billion. Exports totaled $2,131.9 billion and imports totaled $2,810.6 billion. The main problem with these large trade deficits is that they must be financed to maintain the balance of payments account. The main means of financing the current account deficit is by borrowing from other countries. Continued sales of Treasuries to major trading partners for which the United States is a net importer have created a reliance on these creditors, which some say could lead to future political or economic danger.
By contrast, Saudi Arabia and Canada are examples of net exporters because they have oil in abundance, which they then sell to other countries that cannot meet their domestic energy needs.
The pros and cons of being a net importer
Being a net importer means a country has a trade deficit. One benefit of a trade deficit is that it allows a country to consume more than it produces. In the short term, trade deficits can help countries avoid commodity shortages and other economic problems. Trade deficits can also occur because a country is an ideal destination for foreign investment. For example, the U.S. dollar’s status as the world’s reserve currency generates strong demand for the U.S. dollar. Foreigners must sell goods to Americans in order to receive dollars.
In the long run, a trade deficit can cause major problems. The worst and most obvious problem is that a trade deficit can promote some kind of economic colonization. If a country runs a persistent trade deficit, citizens of other countries get funds to buy capital in that country. That could mean new investments to boost productivity and create jobs. However, it may also simply involve acquiring existing businesses, natural resources and other assets. If such purchases continue, foreign investors will end up owning almost everything in the country.