U.S.-China 2019 Barometer
John L. Graham and Ben Leffel
At $400 billion, the 2018 all-time record U.S. merchandise trade deficit with China may reverberate in Washington, D.C. this spring. However, the U.S.-China relationship cannot be captured by a singular focus on bilateral trade as things are much more complicated than that.
The relationship between the United States and China stays dynamic and difficult. Since 1985, we have seen only a decline in the total trade twice between the two countries – during the economic downturns of 2009 and in 2016.
The $400 billion merchandise trade deficit overstates our trade relationship problem
in two ways. First, America continues to sell about $20 billion more in services to
Chinese customers than they sell to us. Tourism and education are prominent examples.
Our surplus exports in these categories are burgeoning and uncounted in the merchandise
trade statistics. Second, products like the iPhone are only assembled in China. Quite
often, most of their parts, labor, and value are actually produced in Japan, South
Korea, Germany, or the U.S. In this year’s Barometer, from the aggregate (national)
down to the granular (city) level, we show both bad news and good news at the start
Let’s get some of the bad out of the way:
- U.S. merchandise exports declined even as two-way trade between the two countries continues to increase
- Unemployment in China has continued its upward march, even eclipsing that in the U.S. for the first time this century. Higher unemployment in China is an unwelcome problem for the world economy.
- Energy use and the consequent carbon footprints seem to be stabilizing in both countries, but not yet declining.
- Military spending in China burgeons while America predominates as both disregard domestic welfare.
- Chinese investments in the U.S. have declined including those in U.S. Treasuries, FDI, and real estate.
- American students’ interest in learning Chinese is waning.
- Life expectancy has declined and homicides have increased in the U.S. in comparison to China.
- Consumer purchasing power continues to climb in both countries.
- Chinese visitors are coming to America in exploding numbers for both tourism and education. Many of them have studied English in elementary school.
- Internet and mobile phone users continue to grow in both countries.
- Gender inequality continues to decline in both countries.
- Corruption (bribery and IP piracy) is declining in both, if only marginally
- Perhaps, the best news of the century is reflected in the teaming of American and Chinese inventors. This remarkable rise in technological collaboration is marked by more than 2000 U.S. patents awarded to such teams from 2016 to 2018. (Note: We are greatly concerned that we see a first ever decline in this positive trend in 2018.)
For additional information CONTACT:
John L. Graham
Professor Emeritus of International Business
The Paul Merage School of Business
John S. & Marilyn Long Institute for U.S.-China Business & Law
University of California, Irvine