Understanding the US-China Trade

The US-China trade relationship is far more nuanced than the headlines suggest, however, and the trade deficit doesn’t tell the whole story. Economic data show that nations trading closely with China outperform nations with less integrated trade ties, and we expect this trend to continue. The US-China trade relationship actually supports roughly 2.6 million jobs in the United States and, as the Chinese middle class continues its rapid expansion over the next decade, US companies face significant opportunities to tap into a new and lucrative customer base that can further boost employment and economic growth.

US-China Trade Relationship

Although some US manufacturing jobs have been lost because of the trade deficit, US firms sell high-value products to China, including cars and trucks, construction equipment, and semiconductors, which support jobs. US firms also export business and financial services, totaling $6.7 billion in 2014 and $7.1 billion in 2015. By 2030, we expect US exports to China to rise to more than $520 billion.

As China has become an integral part of the global manufacturing supply chain, much of its exports are comprised of foreign-produced components delivered for final assembly in China. If the value of these imported components is subtracted from China’s exports, the US trade deficit with China is reduced by half, to about 1 percent of GDP—about the same as the US trade deficit with the European Union.

US Goods Exports to China

China is expected to continue to be one of the fastest growing major economies, creating growth opportunities for American companies— provided China proceeds with economic reforms that will remove lingering market access barriers in many sectors.

China also helps keep US interest rates low. As a major purchaser of US government debt, its demand for US bonds has helped keep borrowing costs down for the US government and the private sector. China now owns about 8 percent of the total stock of US debt, or about $1.2 trillion in US Treasuries.

us overall trade deficit with chiba

A former vice-chair of the Federal Reserve, and Professor of Economics at Princeton, Alan Blinder:

The cost of trade is outweighed by its value—and that an increasingly intertwined world economy is not just beneficial, but inevitable. No policy, can make the changes brought about by changing international trade patterns painless to everybody. But that’s an impossible goal. Change hurts people always, but it also helps people. And holding back the tide of trade is analogous to holding back the tide of technology. The upward march of technology does destroy jobs, but it also creates new ones. Trade does the same, and yet you hear a lot more people say let’s stop trade in its tracks.