U.S. President Trump has made narrowing the U.S.-China trade deficit a key goal, but some experts said it is not a major concern for the economy. CGTN’s Dan Williams reports.
As talks continue between the U.S. and China to resolve the trade dispute, some of the focus continues to fall on the U.S. trade deficit with China, which has widened to a record high of $419.2 billion in 2018.
But Professor Steven Davis of the University of Chicago Booth School of Business does not feel the trade deficit is something the U.S. should be overly concerned about.
“I am not too worried by the trade deficit quite frankly. I don’t think it’s the real issue. To some extent that is the flip side of the United States and the US treasury in-particular of being the world’s largest supplier of safe liquid debt securities. What do we get for that. We get stuff. We get cars and goods and so on. That seams like a pretty good deal to me,” Davis said.
U.S. farmers probably know more than most, the difficulties caused by the various trade disputes. And although a trade deal with China won’t necessarily solve every issue in U.S. agriculture, it could go some way to removing the uncertainty.
It is estimated, the U.S. exported $20 billion worth of agricultural products to China in 2017. But those shipments fell dramatically last year following retaliatory tariffs from China after the U.S. levied import tariffs on a range of goods.
“We need a lift from somewhere and the lift is trade. And the lift is particularly and hopefully China. As they would come in and be significant buyers, long term of corn, pork, soybeans, dairy products. We are a year down the runway now, there has billions of dollars of cost to agriculture. How much longer is what everyone out here is asking,” Brian Duncan, vice president of the Illinois Farm Bureau said.
The trade deficit doesn’t tell the full story.
A host of U.S. companies send raw materials to China for low-cost assembly. Once shipped back to the U.S., they are considered imports.
The trade dispute has hit a range of U.S. industries. Exports of American liquor and spirits to China have grown from $959,000 in 2001 to $12.8 million in 2017.
Paul Hletko, founder of Few Spirits, a craft distillery based near Chicago, said that growth is now under threat.
“I have personally seen a lot off time, effort and money overseas working very hard to develop overseas markets and the tariffs are not helping with that. All of our products that get shipped overseas, result in money coming back into the United States, building the economy for all,” Hletko said.
There is also the issue that even if the U.S. lowers its trade deficit with China, it may not have the overall desired effect.
“I think it is the wrong measure. The bilateral trade deficit with China is particularly the wrong measure. Because if we do clamp down on imports from China, we might reduce the trade deficit with China but we’ll just import things from other countries,” Davis said.
Historically, the U.S. trade deficit has increased when the economy is doing well. Although there is some confusion as to the significance of a trade deficit, what is clear, the issue of tariffs is having a major impact on a range of industries in both the U.S. and China.