US is one of world’s least trade-oriented nations

Given the spate of news about international trade lately, Americans might be surprised to learn that the United States isn’t very dependent on it. Indeed, looking at trade as a percentage of gross domestic product (GDP) – a metric economists sometimes call the “openness index” – the US is one of the least trade-oriented nations in the world.

In 2022, the US trade-to-GDP ratio was 27%, according to the World Bank. That means the total value of US imports and exports of goods and services combined equaled 27% of the country’s GDP. That’s far below the global average of 63%.

In fact, of the 193 countries examined by the World Bank, only two were less involved in international trade than the US. Those were Nigeria, at 26%, and Sudan at 3%. Most world economic powers scored considerably higher, with Germany at 100%, France at 73%, the UK at 70%, India at 49%, and China at 38%. Who knew?

Making sense of trade-to-GDP ratios

What do all these numbers mean? It’s tricky because many factors can influence a trade-to-GDP ratio. For example, a country can have a low ratio in large part because it has high tariffs or other protectionist policies. Nigeria, Ethiopia and Pakistan come to mind in this regard. Others, such as Turkmenistan, have low ratios because they’re geographically remote.

A low trade-to-GDP ratio may also arise from the fact that a country is large, wealthy and developed, with a diversified economy that can provide most of the goods and services it needs domestically. We think this explains a lot about the United States’ extremely low ratio.

On the other hand, extremely high ratios of well over 300% are found in a few tiny countries due to necessity, location or both. Countries such as Luxembourg and the microstate of