US trade deficit with China wider than May 2016, when Donald Trump accused China of ‘greatest theft in history’
- The US trade deficit with China was 9.15 per cent wider in July 2020 than May 2016, when President Donald Trump accused China of ‘raping’ the US on trade
- After narrowing in the early months of the year due to coronavirus shutdowns, the deficit has recovered in recent months
The United States’ trade deficit with China has crept back up close to pre-coronavirus levels after narrowing when the outbreak battered the Chinese economy.
The deficit with China – the gap between the amount the US buys from China and what it sells – was US$31.62 billion in July, just 3.46 per cent lower than US$32.8 billion in July 2019, data released by the US Census Bureau on Thursday showed.
But the rate at which it has grown in recent months will rattle US President Donald Trump, who vowed on the campaign trail in 2016 to eradicate the yawning gap that he claimed showed the inequities in the global trading system.
In quarterly terms, the deficit climbed 36.8 per cent from the first three months of the year to the second, even if it is markedly lower in year-to-date terms than it was last year, due to a shutdown of China’s export engine in the early months of the year, when it was the first to be hit by the coronavirus pandemic.
But perhaps most tellingly, the US trade deficit with China was 4.36 per cent wider last month than it was in July 2016, when Trump was on the campaign trail raging against it. Last month’s deficit was 9.15 per cent wider than May 2016, a month when Trump accused China of “raping” the US on trade.
“Do not forget. We’re like the piggy bank that is being robbed. We have the cards. We have a lot of power with China,” Trump said at the time, during a campaign rally in Fort Wayne, Indiana. “Because we cannot continue to allow China to rape our country. And that is what they’re doing. It’s the greatest theft in the history of the world.”
Reuters agricultural columnist Karen Braun reported that US exports of soybeans to China between January and July 2020 were the lowest since 2004, and while August’s volumes have bounced back with an 18 per cent rise year on year, they are the lowest since 2008 if last year was excluded.
The overall US trade deficit jumped to its highest level in 12 years in July, as imports soared and exports grew by a smaller margin.
Economists have said that prioritising the reduction in the trade deficit is a fool’s errand, since the economic profile of the consumption-driven US means it will naturally buy more goods from cheaper, lower-end manufacturing hubs.
Everyone recognises that the overall direction of the economy is grim
The fact that it narrowed by 32 per cent from a year earlier in the first quarter was not a cause to celebrate, critics said, because it represented a collapse in consumption in the US and a collapse in manufacturing in China due to the coronavirus.
“Needless to say, everyone recognises that the overall direction of the economy is grim. But this is what reducing the trade deficit looks like: relative to our exports, we import less. Today, we are importing less because Americans are consuming less during an economic shut down,” wrote Christine McDaniel, a senior research fellow with the Mercatus Center at George Mason University, in April.
