US goods trade deficit with China widens to record $383bn amid tensions

Tue, 07 Feb, 2023 - 17:23

Eric Martin and Ana Monteiro

Trade in goods between the US and China climbed to a record in 2022, a reminder that consumers and companies in the world’s two biggest economies remain deeply connected while their governments diverge on a range of economic and political issues.

Total merchandise trade between the two countries rose to almost $691bn (€646bn) last year, exceeding the record set in 2018, US Commerce Department data showed. The data is not adjusted for inflation. The annual goods-trade deficit with China widened 8% to $383bn, the biggest on record after the $419.4bn shortfall in 2018.

The deepening trade ties between the countries risk being challenged by the widening split between Washington and Beijing, which have clashed on issue including human rights, trade and competition for technology and markets.

The data comes at a particularly low point between the two amid the shooting down this week of an alleged Chinese spy balloon over US territory.

Washington is pressing ahead with plans to curb China’s access to sensitive semiconductor technology and is trying to get other countries to do the same.

It is also working to lessen US reliance on China for merchandise, encouraging Western companies to invest in what US Treasury Secretary Janet Yellen has termed “trusted trading partners” such as India in a process known as friendshoring.

The value of merchandise exports to China climbed to an all-time high of $153.8bn, while imports increased to $536.8bn, just under the record set in 2018.

“It shows that consumers have minds of their own,” said William Reinsch, who served as a top commerce 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’re still doing a lot of business, despite the efforts of both governments. The macro relationship hasn’t changed that much; we’re still trading a lot,” he said.

Tariff Strategy

The Biden administration has kept in place a set of tariffs imposed under former president Donald Trump and confronted Beijing over what it sees as human-rights abuses, unfair trade practices and threats to US national security.

However, hundreds of US businesses big and small have made a fresh push for the removal of the levies — which were instituted in waves starting in 2018 — saying they have raised their input costs at a time of accelerating inflation.

As the White House reviews the tariffs, there is little indication that the White House is inclined to significantly roll back the tariffs on the imports that span industrial inputs — such as microchips and chemicals — to consumer merchandise, keeping them in place as leverage against China and amid concerns that repealing them would be politically risky.