Can Export Promotion Help Close the Trade Gap?
April 15, 2026
The US goods trade deficit hit a record $1.24 trillion in 2025. This record occurred despite the most aggressive use of tariffs in decades—a reminder that restricting imports is only one side of the trade equation. The other side—promoting exports—has received far less attention in the current policy debate. Yet the United States has a powerful and proven export-promotion tool that is currently operating at a fraction of its capacity: the Export-Import Bank (EXIM). In a recent study, we find that EXIM financing has large effects on US exports, with each dollar of EXIM support generating roughly $4.50 in additional export sales. Our research also shows that EXIM improves the allocation of capital in the economy by directing financing to productive firms that the private sector underserves.
A natural experiment: What happens when EXIM shuts down?
EXIM, established in 1934, is the US government's official export credit agency. It provides loans, loan guarantees, and export credit insurance to support US exporters—particularly for transactions where private-sector lenders are unable or unwilling to provide financing. More than 90 countries operate similar agencies, covering more than 92 percent of global trade.
In mid-2015, EXIM effectively shut down when Congress failed to reauthorize its charter and its board of directors lost the quorum needed to approve new transactions. The shutdown was driven not by economic considerations but by political dynamics: key Senate leaders blocked all board nominations. EXIM remained unable to approve major new deals until mid-2019, when a new board was finally confirmed. During the shutdown, the total value of EXIM's new trade financing collapsed by 84 percent (see figure 1).
This four-year disruption created a unique natural experiment. Because firms and industries differed in how much they relied on EXIM before the shutdown, we could compare the evolution of exports, revenues, and investment for EXIM-dependent firms and products against those that were not dependent on EXIM support.
Large effects on exports, revenues, and jobs
Using product-level bilateral customs data, we find that a $1 reduction in EXIM support caused US product-level exports to fall by approximately $4.50. This multiplier is consistent with the financing-intensive nature of cross-border trade: exporters typically need 20–25 cents of working capital for every dollar of foreign sales, so each dollar of lost trade financing mechanically reduces the volume of exports a firm can support.
The revenue consequences were stark. As figure 2 shows, EXIM-dependent and non-EXIM-dependent exporters tracked each other closely before 2015. After the shutdown, their paths diverged: by 2019, EXIM-dependent firms' revenues had fallen roughly 12 percent behind comparable exporters that did not rely on EXIM support.
The effects extended well beyond revenues. As figure 3 shows, EXIM-dependent firms experienced declines across the board: a 12 percent drop in total revenues, a 14 percent contraction in tangible capital, a 22 percent decline in intangible capital, and a 10 percent reduction in employment relative to less-dependent exporters. These firms were unable to offset lost foreign sales through domestic channels—in fact, export losses spilled over into domestic sales as well, consistent with financing frictions constraining firms' overall scale.
Importantly, these effects are not driven by a handful of large government contractors. Our results are unchanged when we exclude the top recipients of EXIM financing, control for firms' lobbying activities, or remove industries that rely heavily on government contracts.
EXIM helps where capital is most productive
A common concern about government-backed financing programs is that they distort the allocation of capital—directing resources toward politically connected or less productive firms rather than toward their most efficient use. Our findings suggest the opposite.
We measure how productive each firm's next dollar of capital investment would be using its marginal revenue product of capital (MRPK)—essentially, how much additional revenue a firm would generate from one more dollar invested. Firms with high MRPK are “capital-starved”: that is, they have strong investment opportunities but cannot access enough funding. Firms with low MRPK are closer to their efficient size.
When EXIM shut down, high-MRPK firms—the most productive, capital-starved firms—cut their investment by roughly 19 percent. Low-MRPK firms barely responded (see figure 4). This pattern indicates that EXIM was directing capital precisely where it was most productive. For less constrained firms, EXIM financing might have been somewhat redundant—a finding that actually validates the program's design, since these firms could access private-sector alternatives. But for constrained, high-productivity firms, EXIM was filling a genuine gap that the private sector left open.
Why didn't the private sector step in during the four-year shutdown? The answer lies in the structure of international trade finance. Private banks face acute information asymmetries and contractual frictions in cross-border lending, particularly for exports to countries with weaker institutions or higher political risk. These frictions lead profit-maximizing banks to ration credit—not as a temporary distortion, but as their optimal equilibrium strategy. Consistent with this, we find that EXIM's shutdown had approximately twice the effect on exports to high-risk destinations—countries with weaker rule of law, higher perceived risk, or less-developed financial systems—precisely the markets where private financing is hardest to obtain.
An underutilized tool
EXIM is not only effective—it is also self-financing. Over the past three decades, EXIM has returned $9.7 billion to the US Treasury, with a default rate of just 0.3 percent during our study period. It operates under international rules set by the Organisation for Economic Co-operation and Development that prevent it from offering subsidized terms. Beyond that, US export credit support relative to export volumes is well below that provided by countries such as Finland, Denmark, South Korea, and China.
Yet EXIM today operates at roughly 25 percent of its statutory capacity — about $34 billion in exposure against a $135 billion cap—with more than $100 billion in unused lending authority. Its annual new authorizations of $8.4 billion are less than a quarter of its 2012 peak.
As policymakers debate how to address the record trade deficit, our research suggests that scaling up export promotion, rather than relying solely on import restrictions, could meaningfully support US exporters, particularly the productive but financially constrained firms that benefit most from trade financing. EXIM's reauthorization in December 2026 offers a timely opportunity to evaluate whether this tool should play a larger role in US trade policy.