What is on the table with China?

//What is on the table with China?

What is on the table with China?

By the numbers, China has more to lose from a trade war than the U.S. does.  After months of progress, discussions and positive signals, suddenly the trade negotiations with China seem as if they have ground to a halt.  Verbal agreements turned to misunderstandings once pen was put to paper, which is often the way in trade negotiations with much at stake.

With the U.S. setting additional tariffs in motion, and the Chinese likely to do the same, where do we now stand?  This sounds like an impasse, but what do the numbers say?

Using data from the past 12 months through March, let’s start with the size of the U.S. economy, $21.1 trillion.  The U.S. imports about $2.5 trillion, or around 12% of GDP.  The U.S. exports about $1.7 trillion, or 8% of our economy.  That difference of $700 billion between what we import and export is our trade deficit, and China represents about $400 billion of that.

$522 billion of our imports comes from China, about 21% of the total.  Meanwhile, we export $114 billion to China, about 7% of total U.S. exports.

Chinese data in yuan show that Chinese imports from the U.S. equaled 6.5% of total Chinese imports while China’s exports to the U.S. accounted for 19% of total Chinese exports.  The U.S. is the largest export market for China.

The data clearly show that China has become very dependent on exports to the U.S., much more so than the U.S. depends on exports to China.  Simply put, the U.S. can impose tariffs on the $522 billion of total imports from China, while China can do the same only on the $114 billion of goods it imports from the U.S.  A prolonged tariff battle should cause them more economic pain.

2019-05-14T12:06:11-06:00 May 14th, 2019|Blog|0 Comments

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