Tech now accounts for two-thirds of the US trade deficit
The desk posits that the significant surge in tech imports, now representing two-thirds of the US trade deficit, could hinder future US GDP growth rather than bolster it. Per the full note from ING, while tech investments are often celebrated, the reality is stark: the US trade deficit hit $105 billion in September, with $64 billion attributed solely to tech products, reflecting a disturbing trend of capital flowing to countries like Taiwan and Korea. This overwhelming reliance on overseas tech imports signals potential vulnerability for the USD as it grapples with both domestic and international economic dynamics.
What the desk is arguing
The current landscape of the US trade deficit suggests a critical overreliance on foreign technology, which ultimately detracts from domestic growth. Per the full note from ING, the deficit comprises an astonishing $64 billion in tech imports out of a total deficit of $105 billion in September. This signifies an alarming trend where tech products contribute substantially to the trade imbalance, underscoring the complexities inherent in the narrative surrounding US economic expansion.
Supporting this viewpoint, the data indicates that US imports of technology-related products skyrocketed from approximately $20 billion two years ago to $87 billion in September this year. Such escalations indicate not only reliance on foreign suppliers but also highlight a net outflow of capital that may adversely impact the economic growth trajectory of the United States as investment in technology increasingly enables competitive growth abroad.
The alternative read would be that while an increase in tech imports might reflect a burgeoning sector, the detrimental effects on the trade balance cannot be ignored, suggesting that the overall economic picture may be more nuanced than simply viewing tech investment as a net positive for growth.
Where it sits in our coverage
Currently, our consensus target for the USD is 1.075, with a range from 1.04 to 1.12. Notably, jpmorgan targets 1.10 for March 2026 while bofa holds a lower stance at 1.04 for the same tenor.
This perspective aligns most closely with jpmorgan, which recognizes potential pressures on the USD stemming from the trade deficit while factoring in the ongoing strength from tech investments. As our view sits at the higher end of the consensus spread, it reflects a cautious approach towards the outlook for USD amidst the backdrop of rising tech imports.
How other firms see it
Firms such as jpmorgan and goldman are aligned in their anticipations of a weaker USD as trade deficits persist. Conversely, bofa appears more skeptical, suggesting that the adverse flow from tech could lead to even stronger positions for the USD if offsets materialize.
Key indicators to watch would include the USD’s response to ongoing tech sector performance, particularly in relation to employment data and trade balances, which could inform positioning in pairs such as USD/JPY and EUR/USD. The interplay between these factors will be crucial in assessing the future trajectory of the USD against major currencies.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Tech imports now dominate US trade deficit, making up two-thirds of it.
- 02Significant capital outflow to countries like Taiwan and Korea is a risk to US growth.
- 03The current USD level may be pressured due to increasing reliance on foreign tech.
- 04Trade balance dynamics will likely influence FX positioning in the near term.
Market implications
Investors should monitor the USD closely as tech imports continue to shape the narrative around the trade deficit. A critical resistance level lies around 1.08, while potential shifts in capital flows could add volatility to USD/JPY and EUR/USD as we approach year-end positioning.
Risks to this view
Should there be a rebound in domestic tech production or a significant drop in imports, the negative outlook on the USD might be mitigated. Additionally, if geopolitical tensions ease, and global supply chains normalize, the pressure on the trade balance could reverse, leading to a stronger USD.
Older quick take Quick take Published 14:15 United States Translate Tech now accounts for two-thirds of the US trade deficit There has been a lot of commentary about the contribution of tech investment to GDP growth, but with the US running a trade deficit of $64bn in September in tech products alone, out of an overall trade deficit of $105bn, we need to remember that this aspect actually subtracts from growth. Instead, it is a boon to the likes of Korea and Taiwan High tech imports are contributing substantially to the US trade deficit Tech imports fuelling the surge in the trade deficit The US trade balance figures don't normally get hearts racing, but I think this chart below is astonishing. The US trade deficit was $105bn in September, of which $64bn was due to a deficit in computers, peripherals and semiconductors.
The chart shows how imports of tech products that are destined for data centres around the country have not merely gone exponential, but almost vertical. Less than two years ago, the US was importing around $20bn per month of these products. In September, it was $87bn.
US tech imports ($bn) Source: Macrobond, ING "> Source: Macrobond, ING Tech imports offsetting much of the capex boost within GDP So while there is lots of discussion about how much the tech/AI/data centre investment blitz is boosting growth, much of the value added is coming from overseas. This is a net negative for US growth as money is flowing out of the country to the likes of Korea and Taiwan, from which US imports are up 35% and 60% respectively. The result is the chart below showing the contribution to year-on-year US GDP growth.
The black line is the YoY% growth rate with the blue bars showing the contribution from tech capex and AI token spending (including the chips going into data centres). The purple section is the data centre building (the concrete, steel, etc), but then there is the net exports section in orange, which, because of the scale of the trade deficit in tech, is a significant drag on overall growth right now – much of it actually ended up in inventory building of tech products that will be used in coming quarters. Consequently, the US tech roll-out has been a huge boost to tech-orientated exporting nations.
Only three years ago, the US was a net exporter of tech products! Tech capex contribution to GDP is being offset by a surge in tech imports Source: Macrobond, ING "> Source: Macrobond, ING US Trade Tech Cpaex Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument.
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