US-China trade remains robust despite tensions

Goods and services flows stay strong, notwithstanding the decoupling talk

Despite all the talk of decoupling amid other diplomatic discord, trade flows between the United States and China remain exceptionally strong.

US exports of goods and services to China in October increased $1.1 billion to $13.1 billion, and imports of goods and services were up $3.3 billion to $39.7 billion. The deficit in the trade of goods with China rose 9 percent to $26.5 billion, according to a US Commerce Department report released on Dec 4.

US goods exports to China increased to a record $14.72 billion in October from $11.54 billion in September. Goods imports from China jumped to $44.83 billion from $41.21 billion in the month, hitting their highest mark since December 2018.

Total US exports and imports rose for the fifth straight month, with the global economy getting a boost from a strong economic rebound in China.

According to official Chinese data released on Dec 7, the nation’s foreign trade continued to pick up in November with notable growth.

Foreign trade expanded 7.8 percent year-on-year last month, with exports jumping 14.9 percent year-on-year in yuan terms. Imports dipped 0.8 percent from a year ago, the General Administration of Customs said in a statement.

From January to November, China’s trade in goods with the US soared 6.9 percent year-on-year to 3.65 trillion yuan ($558.2 billion), the administration said.

China remained the US’ top trading partner in October, and commerce between the world’s two largest economies accounted for 16.9 percent of all US trade in the month, according to US Census Bureau data.

In the ten months through October, US exports of goods to China rose to $95.82 billion, from $87.44 billion in the same period last year. Imports fell to $348.72 billion, from $381.55 billion a year earlier. Services exports to China have remained suppressed because of a decline in tourism and education spending resulting from the coronavirus pandemic.

Economist Stephen Roach, in an opinion article published on the Financial Times website on Dec 6, speculated on a root cause of US trade deficits.

“Trade imbalances between nations do not occur in a vacuum. They are an outgrowth of macroeconomic saving problems,” he wrote.

“The US, with its chronic shortfall of domestic saving, ran merchandise trade deficits with 102 nations in 2019. China, with its chronic saving surplus, ran merchandise trade surpluses with 159 nations in 2018.

“For that reason alone the current approach to the US-China trade dispute is flawed, as are the tariffs that underpin it,” wrote Roach, a faculty member at Yale University and former chairman of Morgan Stanley Asia.

Roach said the US should increase its savings rate while China should reduce its own.

“That will be harder for Washington than for Beijing, as US saving is now under acute pressure with huge COVID-19-related budget deficits,” he wrote.

Long Yongtu, China’s former viceminister of foreign trade, in a recorded speech for a webinar organized recently by the South China Morning Post, said: “I hope that we can have a serious talk with our US colleagues on how to narrow the (trade) gap through a dynamic process, through the market mechanism.”

He said that political meddling was not the way to achieve that.

There also is optimism for a potential change in US- China trade relations with a new administration led by Joe Biden as president.

Craig Allen, president of the USChina Business Council, told Xinhua on the sidelines of the Horasis Asia Meeting on Nov 30: “I fully expect the diplomatic part of the bilateral relationship to grow rapidly ... and that there will be a lot more dialogue on the various issues.”