In 1995, the United States recorded a $13 billion trade surplus in advanced technology products (ATPs). Three decades later, the balance has shifted sharply. According to the latest U.S. Census Bureau data, the United States posted a $297 billion ATP trade deficit in 2024, the largest on record.
Although the United States continues to lead in the global trade of intellectual property (IP), significant portions of advanced manufacturing capacity have migrated to overseas competitors, particularly in East Asia. While the United States’ IP trade surplus reflects strong domestic capabilities in invention and design, the offshoring of production limits the country’s ability to fully capture the economic and strategic benefits of the innovations it produces, undermining its industrial competitiveness.
What are ATPs?
ATPs are designated by the U.S. Census Bureau as high-technology goods that reflect advanced innovation and significant research and development. They encompass biotechnology, aerospace, advanced materials, flexible manufacturing, and information and communications technologies.
Between 1995 and 2024, the U.S. ATP trade balance shifted from a surplus to the largest deficit on record, reflecting the gradual relocation of production capacity to East Asia. Technologies first developed in U.S. laboratories, including LCD displays, photovoltaic panels, lithium-ion batteries, and semiconductors, increasingly moved to foreign production sites, weakening the connection between American innovation and industrial production.
The absence of a strong domestic manufacturing base constrains the U.S. innovation system’s capacity to scale and improve new technologies. Laboratory breakthroughs often require advanced production capabilities to transition from prototypes to market-ready applications, yet the United States lacks sufficient capacity in this segment of its innovation system. At the same time, heavy dependence on external suppliers introduces supply chain risks and heightens geopolitical vulnerabilities, leaving critical technologies exposed to shocks beyond U.S. control.
This limitation reduces the economic and strategic returns from national research investments, weakens the creation of high-value employment, erodes industrial expertise, and undermines supply chain resilience. Over time, it threatens to diminish the strategic advantages associated with U.S. leadership in science and technology.
U.S. IP Leadership and Long-Term Competitiveness
The United States holds a leading position in high-value innovation, particularly in technology design, licensing, and commercialization. This advantage is reflected in global IP trade flows. In 2023, U.S. IP exports reached $134 billion, nearly three times Germany’s $48 billion and in clear contrast to China’s $41 billion trade deficit.
However, leadership in knowledge creation across science and technology without manufacturing capacity cannot secure long-term competitiveness; the two are tightly coupled. Countries that combine upstream innovation and downstream production have gained lasting advantages through industrial clustering, stronger supply chains, faster technology diffusion, and sustained workforce learning. Japan achieved this through leadership in advanced robotics, while South Korea did so in semiconductors. Meanwhile, in key sectors including semiconductors and clean energy, the United States has lost ground, diminishing the economic and strategic advantages that stemmed from earlier scientific leadership.
The trajectory of the U.S. ATP trade balance highlights a structural vulnerability in the national innovation system. Leadership in science and IP creation remains a strength, but without rebuilding domestic manufacturing capacity the United States cannot fully capture the economic, technological, and strategic returns of its innovations. The central challenge is not only to sustain invention but also to integrate research, production, and commercialization through targeted industrial policies, investment in advanced manufacturing, and workforce development. Greater integration of these links is essential if the United States is to translate scientific leadership into lasting industrial competitiveness and national security.
