Advanced Technology Products Rely on Strong Trade Partnerships

Advanced technology companies are the backbone of America’s innovation ecosystem, representing a key driver of economic growth and employment and nearly one-fourth of all exports last year. Maintaining open and free trade with allies is essential to boosting these important industries while strengthening U.S. firms' competitiveness. 

In 2024, the United States exported over $521 billion in Advanced Technology Products (ATP) internationally. Mexico, China, and Canada—recent targets of a trade war initiated by the Trump administration—were the three-largest recipients, receiving $155 billion worth of ATP products (30 percent of such exports). Other key export destinations include European nations, Japan, and Taiwan (figure 1).

Figure 1: Top importers of U.S. ATP, 2024

According to the Census Bureau’s trade data, 10 industries are classified as advanced, including aerospace, biotechnology, and information and communication technologies (ICT). Five nations in 2024 represented  the top export markets for these 10 goods: China, Italy, Israel, Mexico, and the Netherlands. (See figure 2.) China was the top export market for 4 of the 10 categories, including aerospace and nuclear technology (an industry in which China has proven to be more innovative than the United States). Mexico, a top destination of three advanced technology exports, purchased 24 percent of all ICT exports from the United States, including essential technologies such as phones and computers.

Figure 2: Share of U.S. advanced-technology exports to the top importer (in parenthesis), 2024

As two of the United States’ largest trading partners, Canada and Mexico purchase a significant portion of U.S. ATP exports. The two North American nations import 36 percent of all ICT exports from the United States, 29 percent of electronics, and 21 percent of flexible manufacturing, including manufacturing machinery. (See figure 3.)

The Trump Administration’s threat of a 25 percent blanket tariff on all goods imported from Canada and Mexico has already triggered retaliatory action. Canada has thus far implemented tariffs on $51 billion of U.S. goods and is poised to increase tariffs following an escalation of the trade war by the United States. Meanwhile, Mexico has not yet imposed retaliatory tariffs on U.S. goods. The imposition of tariffs and newfound negative sentiment surrounding American-made products is a bane for U.S. exporters, who are likely to see reduced sales in the coming months if the trade war progresses.

Figure 3: Canada and Mexico share of U.S. advanced technology exports

Meanwhile, China, which has also been subjected to 20 percent tariffs under the Trump administration, presents a different challenge. Unlike trade with Canada and Mexico, the United States has attempted to scale back trade in advanced industries with China as a way to combat intellectual property theft, one of the many innovation mercantilist practices that China uses to distort international markets. Despite this, China is still America’s second largest export market for ATPs, importing nearly $46 billion by value. China represents the destination for over 15 percent of U.S. exports in flexible manufacturing, nuclear technology, and opto-electronics (figure 4.)

Rather than pushing to expand exports of these highly sensitive goods into the Chinese market, U.S. exporters and policymakers should work to create an export market for these goods without China. This means expanding trade agreements—such as joining the Comprehensive and Progressive Transpacific Partnership (CPTPP) agreement—and integrating the North American production system more, not less.

Figure 4: China share of U.S. advanced technology exports

The future of America’s manufacturing sector relies on advanced technology products, and the future of America’s advanced technology exports relies on utilizing our strategic partnerships, not withdrawing from the markets. Cutting off trade with America’s closest allies or global markets under the banner of “America First” would only shoot our innovation economy in the foot. The data shows that America’s most advanced industries depend on open, free, and mutually beneficial trade with our closest allies while working together to establish globally integrated trade networks that punish mercantilists such as China. Instead of doubling down on risky, retaliatory trade wars, the United States should strengthen its existing alliances and build more with like-minded nations to bolster its high-value export markets.