Asia Minute: U.S. – China Trade: Not a Simple Calculation

Apr 27, 2018

Credit Buonasera / Wikimedia Commons

Several top officials in the Trump Administration will be heading to China next week to talk about trade. The group will be led by Treasury Secretary Steve Mnuchin and will include the head of the National Economic Council, Larry Kudlow, as well as the U.S. Trade Representative. While no breakthroughs are expected, some of the challenges are clear. HPR’s Bill Dorman has more in today’s Asia Minute.

Don’t look for big solutions on this trip.

The U.S. – China trade relationship has developed over years — shaped by consumer behavior on both sides.

The U.S. economy has long been driven by consumer spending, while China’s has featured exports and investment. In simple terms, traditionally Americans spend more, Chinese save more, and that help leads to what economists call structural imbalances.

But parts of this picture are shifting.

Chinese are spending more, and wages in China are rising—the country is no longer the world’s lowest cost manufacturing base.  The global trade picture has gotten more complicated as corporate relationships have in many cases changed the commercial accounting when it comes to national borders.

One example: Ford Motor Company sold more than 900,000 cars in China in the first ten months of last year. But only 2-percent of them were exported from the United States.

Credit Wikipedia

Most were made locally with a Chinese partner; which means they don’t even show up in trade figures—although they’re a key part of the trade relationship.

In agriculture, China is the second biggest market in the world for U.S. products—trailing only Canada. 

But China is also an exporter; the third largest supplier of agricultural products to the United States. Showing even the simple trade numbers can be complicated.