US-China Trade Numbers Reveal Political Risk

Derek Scissors / February 14, 2011

Our trade deficit with China rose 20 percent to a record $273 billion last year, according to figures just released by the Commerce Department. For political reasons, this is a depressing, dangerous result.

American exports to the PRC soared 32 percent in 2010, which is a welcome development. It is nonetheless depressing because American imports from the PRC rose 23 percent, yet the trade gap still widened.Our exports are so much smaller than our imports that they fall further behind when growing noticeably faster. With imports growing 23 percent, our exports would have had to double last year for the trade deficit just to hold steady.

What may be politically dangerous is what lies beneath the deficit. The mix of products in trade with China will further inflame debate. The top American exports are reasonable. Rising global and Chinese food prices put American agriculture in high demand, benefiting soybean and cotton growers in particular. This will continue unless China closes its agriculture markets.

It was not a particularly good year for aircraft sales, but autos were strong, as were other advanced products. Neither side of the Pacific is happy about the volume of American scrap headed to the PRC, a function of massive overproduction by Chinese industry.

What we import from China will prove more troublesome for the Congress. China makes things the U.S. no longer makes in large amounts, such as toys and footwear. But they also make things we do make, such as communications equipment and printed circuits. The U.S. and PRC are both part of the global production chain in advanced goods, where the U.S. provides inputs such as semiconductors and measuring devices, which China assembles into computers and audio–visual equipment. (more…)