US goods deficit with China—no end in sight
President Donald Trump says he wants to redress the United States trade deficit with China, but the goods deficit just keeps on growing. That’s the case, even though US exports to China grew in June 2018, 14.5 percent year-on-year to $11.1 billion. But imports from China in June were $44.6 billion, a 5.5 percent increase year-on-year, yielding a deficit that reached $33.5 billion for the year so far, up 2.8 percent.
US exports increased primarily in aircraft and parts, and crude oil, while US imports from China increased in clothing, toys, games and sporting goods, and cell phones, according to the latest report form the US-China Economic and Security Review Commission. Notably, US agricultural exports to China fell 34.4 percent in June, even though US farmers saw a surge in soybean sales, as they tried to get ahead of Chinese retaliatory tariffs.
In the first six months of 2018, US imports from and exports to China increased by between eight and nine percent. The goods trade deficit for the first half of 2018 also increased about nine percent—to $185.7 billion—relative to the first half of 2017. Trade with China is typically marked by greater export and import volumes during the second half of the year.
A review of the top five US exports to and imports from China shows that transportation equipment comprises the largest share—about a fifth—of US exports to China, while computers and electronic products make up about a third of US imports from China. Agricultural products, usually ranked in the top five, saw declines beginning in April, leading to an overall decline of 14 percent for the first half of the 2018. Exports of livestock and livestock products fell by 39.2 percent relative to the second quarter of 2017. US agricultural exports to China usually pick up in late summer, but with Chinese retaliatory tariffs on US agriculture in force, the coming months determine their impact.
Waste and scrap exports remain impacted by the Chinese ban on imports of waste and scrap; exports fell 30.3 percent relative to 2017.
Though transportation equipment maintained its place as the largest US export to China, the value of transportation equipment’s exports declined about 10 percent over the same period in 2017. Conversely, oil and gas exports continued to increase in the second quarter, with a 129 percent increase year-on-year.
The US trade deficit with China in advanced technological products (ATP) stood at about $32.1 billion in the second quarter of 2018, up 3.7 percent over the second quarter of 2017. Information and communication technology (ICT) remained the greatest contributor to the deficit, with $37.0 billion
in imports from China compared to $1.0 million exports from the United States to China. The ICT deficit increased about 10.2 percent year-on-year in the first half of 2018. The United States’ largest ATP export to China, aerospace technology, decreased about 18 percent in the first half of 2018 compared to the first half of 2017.
On the bright side, the first quarter of 2018 saw strong export growth in US services to China driving the to a record high of $12.9 billion, a 6.4 percent year-on-year increase. Services now account for 35 percent of total US exports to China and 3.5 percent of total US imports from China, up from 19.7 percent and 2.9 percent, respectively, in the first quarter of 2013. US services exports to China in the first quarter increased 16 percent year-on-year to reach their highest level yet, at $17.3 billion, due to high levels of US travel exports and strong growth in US exports of intellectual property (IP) charges. US exports of travel, which include Chinese students coming to the United States to study, dominate
US services trade with China, accounting for 62 percent of total US services exports to China in the first quarter of 2018. Growth in travel exports slowed to 1.8 percent year-on-year—their slowest first quarter growth since 2004—to reach $10.7 billion.7 US exports of IP charges, the second-largest category, grew 20.7 percent year-on-year to reach $2.3 billion; transportation totaled $1.4 billion, a 6.8 percent year-on-year increase.
While only accounting for 1.5 percent of total US services exports, telecommunications, computer, and information services exports to China saw 60 percent year-on-year growth, a record, to reach $256 million.
US imports of Chinese services grew 10.3 percent year-on-year to reach $4.4 billion. Transportation, travel, and other business services accounted for 79.2 percent of US services imports from China. Transportation grew 7.8 percent year-on-year to reach $1.2 billion; travel (including for education) increased 10.4 percent to reach $1.1 billion; and other business services increased eight percent year-on-year to reach $1.1 billion. US imports of IP charges, government goods and services, and telecommunications, computer, and information services saw strong year-on-year growth in the first quarter of 2018, increasing 53.3 percent, 23.8 percent, and 21.4 percent, respectively.
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