Home > Uncategorized > The US is not that important to China

The US is not that important to China

from Dean Baker

It is common to see stories that have China’s economy reeling as a result of the Trump tariffs. While it does seem that China’s economy is experiencing difficulties, it is hard to tell a story where Trump’s tariffs are a major factor.

First, as I pointed out in the past, China’s trade surplus has actually risen in 2018 compared to 2017. In the first 10 months of 2018, (Census is not releasing new data because of the shutdown), China’s surplus on goods trade was up 11.5 percent from 2017. Perhaps the surplus would have risen even more without the tariffs, but it is a bit hard to believe that China’s economy is suffering too much because its surplus with the US only increased by 11.5 percent.

But the other point is that China’s exports to the US are just not that large a share of its economy. If we assume that exports for November and December would be roughly comparable to the prior two months, then the total for 2018 would be $550 billion, which comes to 4.2 percent of its $13 trillion economy.

However, as we are endlessly reminded by supporters of recent trade deals, much of the value in these exports is generated elsewhere. For example, we count the full value of an iPhone manufactured in China as an export to the US even though the vast majority of the value-added comes from other countries. (This is offset by the fact that much of the value-added of goods imported from Japan, Germany, and elsewhere is produced in China. If anyone in this dispute actually cared about reducing the trade deficit, getting China to raise the value of its currency would help to reduce both the direct and indirect trade deficit with China. But in any case, this issue is irrelevant in this context.)

Let’s assume that 30 percent of the value-added in China’s exports comes from other countries. This means that exports to the US are equal to 3.0 percent of its GDP.

Even if we assume a very large impact from Trump tariffs, perhaps he can reduce US imports from China by a third. This would be 1.0 percentage point of GDP. That is hardly trivial, but not the sort of thing that would push China into a recession.

The long and short is that Trump’s trade measures can be a nuisance to China and can undoubtedly cause serious problems for the most affected industries, but anyone thinking that they can sink China’s economy is seriously deluded.

  1. James Beckman
    January 10, 2019 at 3:50 pm

    Dean, nice that you made the effort to do the math, as indeed with everything connected with the American President, the focus must be upon him & his critical role in everything.

  2. January 10, 2019 at 4:44 pm

    Thank from me also for your numerical analysis. I do not believe much from united states news publishers and did not bother to read speculative writings indicating China has problems because of recent tariffs.

    • January 10, 2019 at 4:50 pm

      Thank you from me is what I meant to type. This is the kind of topic I wonder about;

      US embassy in Saudi Arabia is over 100 acres and ships hundreds of tons of goods around the world. Shipping tonnage stats from the biggest embassy in the world,


      • Helen Sakho
        January 11, 2019 at 1:13 am

        That we have all been citizens of the “united” state is a long standing assumption, and nothing new. China has its own extremely large internal economy, plus it can flood almost every external market with cheap goods which find their way into secondary and peripheral markets. The astonishing realities of its own internal situation (increasing socio-economic polarisation, exploitation of labour, pollution and health problems just to mention a few) are never discussed. Is this because we are all still measuring everything according to the latest presidential show in America?

  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.