Categorized | China, Economy, Trade

Why is the U.S. the only country with a China trade deficit?

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The news article below says the U.S. can’t show the trade deficit with China is not China’s fault.  The assertion is misleading because it contains partial truths… as all great false arguments do.

The claim is that China does nothing wrong because it does not run a deficit with the rest of the world, just the U.S.  The journalist, Eduardo Porter, does not explicitly assert that China has clean hands, i.e. by arguing that China actually lets its currency float, or that the chieftains of the Communist Party getting out of the state owned enterprise business.

So what is really happening.  First, the U.S. market is the biggest, richest, best consumer market to target for predation.  The cost-benefit is very clear.  Second, other countries protect their interests.  In other words, they simply don’t let China take over their industry or markets.  They understand that the cost of massive cheap, subsidized imports is high because it guts decades of economic and industry buildup.  They understand that being reduced to only consumer status is a recipe for party today and structural poverty tomorrow.

So, the real truth is that it is China’s fault for being a predatory rule-breaker.  And it is the U.S. fault for not protecting national economic interests.


China’s Vanishing Trade Imbalance

Published: May 1, 2012

America’s economic imbalance with China has been a singular concern of policy makers for more than half a decade. Senators Charles E. Schumer and Lindsey Graham wanted to punish China for pegging the exchange rate to the dollar in 2005 — arguing that its policy of cheapening the currency to subsidize exports was fueling a huge trade surplus that cost America jobs.

Their bill never passed. But reducing China’s surpluses has remained at the top of the bilateral agenda ever since.

Something unexpected has happened to China’s economy, however. Its surplus with the rest of the world has largely disappeared. …

Still, there is reason to think that China’s economic strategy may be turning a corner. While its current-account surplus with the United States, $318 billion last year, was somewhat bigger than it was in 2007, China actually ran a big deficit with the rest of the world. China’s vast takeover of world markets may be running out of steam.

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