Forget about steel, car parts and manufactured goods, service exports are key to U.S. trade future

When President Donald Trump bemoans the U.S. trade deficit, he's almost always speaking about goods — steel, beef, lumber, car parts and other products that flow in and out of the country

But the far bigger long-term growth potential and competitive opportunity for turning around the United States' trade woes lies with exported services, from financial consulting and insurance to engineering and digital music.

Unlike trade in goods, in which the U.S. ran a deficit of $750 billion last year, the country posted a $250 billion surplus in services.

In the case of a few nations, exports of services turned U.S. trade deficits into surpluses. For example, Trump recently complained about Canada's $15 billion advantage in trade of goods with the U.S., but when services are counted, it is the U.S. that has an overall $8 billion surplus.

"The real action in the future is trade of services; it's large and growing rapidly," said Mark Zandi, chief economist at Moody's Analytics.

He and others see the lack of attention given to U.S. service exports as a lost opportunity.

Exports account for just 4 percent of the sales of U.S. services that are tradable, compared with about 20 percent of American manufactured goods, said J. Bradford Jensen, a professor at Georgetown University's McDonough School of Business and a leading expert on services trade.

Worldwide, growth of trade in services has been outstripping that of goods over the last quarter century.

And experts say American service providers would be selling more abroad were it not for a wide variety of barriers in overseas markets. Many countries are even more protective of their services than manufactured goods, such as banking, telecommunications and sectors that disseminate information.

"The U.S. has a comparative advantage in services, but in a sense it's not doing as much to exploit this advantage," said Andrea Ariu, a postdoctoral fellow at the Geneva School of Economics and Management who has researched services trade in the world.

Peter Navarro, a trade and manufacturing policy adviser to Trump, has argued that manufacturing is what matters in trade because it pays significantly higher wages than services and has a much bigger ripple effect on the rest of the economy.