Mar 7, 2018

The scale of the U.S.-China trade deficit

Erica Pandey, author of @Work

President Trump previewed a plan of action this morning to reduce the U.S.-China trade deficit on Twitter, saying, "China has been asked to develop a plan for the year of a One Billion Dollar reduction in their massive Trade Deficit with the United States."

By the numbers: A reduction of $1 billion would comprise just a tiny fraction of the $375.2 billion trade deficit that the U.S. had with China in 2017. That deficit has been expanding since 1985 and, in 2016 alone, it grew by over $28 billion.

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Data: U.S. Census Bureau; Chart: Andrew Witherspoon / Axios
The facts
  • China's global profile grew when it was allowed to join the World Trade Organization in 2001. Membership in the WTO entitled China to the stable tariff rate enjoyed by other members.
  • Since then, Chinese exports have taken over the world. China has quickly emerged as a manufacturing powerhouse, often buying raw materials from the U.S. and other nations and exporting the finished products back to the States.
  • In 2017, the U.S. imported $505.6 billion worth of goods from China. While U.S. exports to China have grown as well, they've risen at a much slower rate.
  • Yes, but: With various U.S. economic figures — such as industrial output and exports — at or near record highs in 2017, China's rise hasn't come at the U.S.'s economic expense, per Scott Lincicome, a trade policy expert at the Cato Institute:
"We like to think of global trade as an expanding pie. Your share might decline relative to other countries, but that's fine as long as your domestic indicators are doing better than they were last year."
Where things stand
  • Trump plans to announce his steep tariffs — 25% on steel and 10% on aluminum — on Thursday. The across-the-board tariffs will not only impact Chinese exports to the United States but also will apply to close allies as well. The European Union has already announced a round of politically-targeted tariffs against the U.S. in response to Trump's trade moves.
  • Trump also tweeted about China's theft of U.S. intellectual property, which has been a continual flash point in U.S.-China relations. There had been plans to punish China with tariffs based on that threat stretching back to the Obama administration, indicating a much wider level of support for that action.
The bottom line
These tariffs may be the last moment when America gets to set the terms of engagement with China.
— UC Hastings law professor Frank Wu at a Brookings event Wednesday

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Trump to end Hong Kong’s special trade status

President Trump. Photo: Win McNamee/Getty Images

President Trump announced on Friday that the U.S. would be fundamentally changing longstanding policies toward Hong Kong as a result of Chinese encroachment on the city's autonomy.

Why it matters: Trump said he would be effectively ending the special trade status that has allowed Hong Kong to flourish as a gateway to the Chinese market. That leaves an uncertain future for businesses that operate in Hong Kong, not to mention the city's 7 million residents, and could be met with reprisals from Beijing.