March 10, 2016

American trade issues aren’t just about China

Trade has been a recurrent theme in both the Republican and Democratic presidential primary debates, with candidates in both parties repeatedly promising to be tougher on trade, especially with regard to China.

Republican presidential candidate Donald Trump has promised to impose a 45% tariff on imports from China. Democratic presidential hopeful Hillary Clinton has pledged to crack down on Chinese currency manipulation that gives Chinese products an unfair competitive advantage.

Americans agree that trade with China is an issue. While global trade ranks low overall on the public’s list of priorities – just 31% rate it as a top priority – 52% of Americans say the U.S. trade deficit with China is a very serious problem.

Two ways of looking at foreign tradeAmericans have good reason to worry about competition from China, the country with which the U.S. has its largest merchandise trade deficit. But competition from high-value exporters such as Germany also poses a challenge that, so far, has been largely ignored on the campaign trail.

Among the top five nations with which the U.S. runs a trade deficit, Germany has a $912 per capita trade advantage with the U.S. (total deficit divided by Germany’s total population), compared with China’s $266 per capita imbalance. This is largely because China’s large workforce churns out a high volume of low-value products for export to the U.S., while Germany’s smaller workforce largely produces high-value products, such as automobiles, to sell to Americans.

U.S. per capita trade deficit with Germany has outpaced that with ChinaWhy should we look at the trade numbers this way? Because the composition of the U.S. trade deficit may say as much about the international competitive position of the United States as the trade figures we see in headlines.

The U.S. per capita trade imbalance with both China and Germany has deepened since 2009, but Germany’s has done so faster. This growing competition from high-value-added products from Germany may be no less challenging in its own way than the competition posed by the far more numerous lower-value-added goods from China.

And as China’s exports of high-value products to the U.S. increases – General Motors now intends to sell Chinese-made Buick SUVs in the U.S. in 2016, for example – the U.S. per capita trade imbalance with China may widen.

Topics: Bilateral Relations, Economic and Business News, Economic Policy, Globalization and Trade, National Economy, World Economies

  1. Photo of Bruce Stokes

    is director of global economic attitudes at Pew Research Center.

1 Comment

  1. Ray Tapajna8 months ago

    In the first place free trade is not trade as historically practiced and defined. In the past trade was about trading products and goods. A nation that did not have this or that , traded with nation that had what they wanted.

    Trade was not based on out sourcing, in sourcing, moving factories for the sake of cheaper labor or worst yet having foreign countries being paid by taxpayers to build their assembly plants in our country. We did not have this economic insanity.

    In a small town in Georgia they put up a banner in the middle of town saying “Thank You Jesus for KIA” after the taxpayers of Georgia paid about $160 million dollars to KIA to build their assembly plant there. With this kind of nonsense nothing makes sense.
    All that the American people know is they and millions of others have lost their jobs and businesses due to free trade economics which divides investment from production and move production anywhere in the world for the sake of cheaper labor.