Trade Imbalances and the Global Footprint of U.S. Multinationals

November 14, 2025, Paper: "Why does the U.S. run a persistent trade deficit in goods—and a growing surplus in services—in an era of global production? This paper examines the role of U.S. multi national corporations (MNCs) in shaping these imbalances. Using newly harmonized data covering the global operations of U.S. MNCs over four decades, we document a systematic reallocation of production and service delivery across borders. We show that the expansion of MNC activity is closely linked to the evolution of the U.S. external balance: trade deficits in goods are disproportionately associated with rising foreign production and sourcing by U.S. firms, while surpluses in services grow alongside the outward delivery of digital and intangible-intensive activities. Yet the observed goods deficit is not driven by trade directly conducted by U.S. MNCs—whether through intra-firm transactions or through U.S. parents and affiliates trading with unaffiliated firms. Rather than reflecting the global footprint of U.S. MNCs, the goods trade deficit primarily captures imports by domestic firms with no foreign presence and by the U.S. affiliates of foreign multinationals. Its structure nonetheless mirrors the production networks and sourcing patterns shaped by U.S. firms as they reorganize activity across borders"