US-China trade in goods hits record despite differences

Total merchandise trade between the two countries grew to $690.6 billion last year, surpassing the record set in 2018, according to Commerce Department data released Tuesday. The figures are not adjusted for inflation.

The annual goods trade deficit with China rose 8% to $382.9 billion, the largest on record after a deficit of $419.4 billion in 2018.

The deepening of commercial ties between the two countries risks being threatened by the growing division between Washington and Beijing, which have clashed over issues such as human rights, trade and competition for technology and markets. The data also comes at a particularly low point between the two, amid the shooting down this week of an alleged Chinese spy balloon over US soil.

Washington is going ahead with its plans to curb the access of China to sensitive semiconductor technology and tries to get countries it considers allies to do the same.

It is also trying to reduce America’s dependence on China in terms of merchandise, encouraging Western companies to invest in what the secretary of the TreasureJanet Yellen, has called “trusted business partners”, such as India, in a process known as friendshoring.

The value of merchandise exports to China rose to an all-time high of $153.8 billion, while imports rose to $536.8 billion, just below the record set in 2018.

“This shows that consumers have a mind of their own“, said william reinschwho served as a senior trade official in the Clinton Administration and is now a senior adviser at the Center for Strategic and International Studies, a Washington-based think tank. “At the market level, we continue to do a lot of business, despite the efforts of both governments. The macro relationship hasn’t changed that much; we continue to trade a lot.”

tariff strategy

The government of Biden has maintained in force a series of tariffs imposed under the presidency of donald trump and has confronted Beijing over what it sees as human rights abuses, unfair trade practices and threats to US national security.

But hundreds of American businesses large and small have made a new push to have the levies — which were introduced in waves starting in 2018 — removed, saying they have driven up their input costs at a time of accelerating inflation.

As the White House reviews the tariffs, there is little sign that it is inclined to cut them significantly on imports ranging from industrial inputs such as microchips and chemicals to consumer goods, keeping them as leverage against China and amid concerns that repealing them it would be politically risky.

high point of chips

The chip industry remains a major focus of trade tension.

Although China is the biggest maker of phones and computers, US companies still control most of the underlying chip technology, and last year it tightened restrictions on semiconductor exports. Beijing has filed an appeal with the World Trade Organization to try to overturn US-imposed export controls, which are intended to limit the Asian country’s ability to develop a domestic semiconductor industry and equip its military.

Officials on both sides are looking for ways to handle the differences between the two powers, and Yellen and Vice Premier Liu He held face-to-face meetings in Zurich in January. This followed face-to-face talks between Presidents Joe Biden and Xi Jinping in Bali, Indonesia, in November.

But efforts to thaw relations suffered a setback after the Pentagon detected a suspected Chinese surveillance balloon flying high over sensitive nuclear sites in Montana, prompting the postponement of a visit by Secretary of State Antony Blinken.

Business partners

China maintained its third place among the United States’ top goods trading partners in 2022, with 13% of total trade. Canada retained first place with 14.9%, or US$793.8 billion, while Mexico ranked second with 14.7%, or US$779.3 billion.

The only change in the top 10 ranking from 2021 was Vietnam, which moved up two places to eighth with total trade of $138.9 billion.