U.S.-China trade

Tussle between giants

Print edition : April 27, 2018
The ongoing trade war between the world’s biggest economies comes on the heels of a record-high U.S. trade deficit with China.

AS trade tensions simmer between the United States and China following the Trump administration’s plan to impose tariffs on $50 billion worth of Chinese goods, to which China has retaliated with plans to hike taxes on American goods of an equivalent amount, a close look at the state of U.S.-China trade ties over the past decade reveals that the value of Chinese exports to the U.S. far outweighs the value of Chinese imports from the U.S. As a result, the U.S. trade deficit with China has been steadily widening, creating a massive imbalance.

Data from the U.S. Census Bureau show that the U.S. trade deficit with China touched a record $375.22 billion in the 2017 calendar year. It has been on an upward swing since 2010, when it was $273.04 billion. It first crossed the $300 billion mark in 2012 ($315.10 billion). Historical data show that the trade deficit first entered the billion-dollar club in 1986.

Chinese exports to the U.S. also touched a record high of $505.59 billion in 2017. They have been growing in strength since 2010, when the figure was $364.95 billion. The top revenue earner for China in 2017 was cell phones and other household goods, which accounted for a whopping $70.4 billion, followed by computers ($45.5 billion) and telecommunications equipment ($33.5 billion).

The steady rise in Chinese exports over the past decade has also been accompanied by a similar healthy growth in U.S. exports to China, from $62.93 billion in 2007 to $130.36 billion in 2017. The top U.S. exports by value in 2017 were civilian aircraft and components, which brought in $16.26 billion, followed by soybeans, which accounted for $12.36 billion, and passenger cars ($10.52 billion). Not surprisingly, these three categories were targeted by China for a tax hike in early April.

Since the turn of the century, China has also been stepping up its investments in the U.S. According to the U.S.-based Rhodium Group, an independent research provider, China closed a total of 1,536 deals valued at $138.1 billion in the U.S. in the 2000-2017 period. Of these, greenfield deals totalled 857, worth $8.6 billion, while acquisitions totalled 679, worth $129.5 billion. The investments comprised 368 government deals worth $32.8 billion and 1,167 private deals worth $105.3 billion.

Chinese investment in the U.S. picked up pace in the past six years, starting with 95 deals worth $7.6 billion in 2012. It peaked in 2016 with 177 deals worth $45.2 billion. In 2017, it stood at $29.4 billion through 141 deals.

The top receiver of Chinese investment in the 2000-2017 period in terms of value was real estate and hospitality, with $39.79 billion in 219 deals, followed by transport and infrastructure ($17.04 billion) and information and communications technology ($16.31 billion).