Trade between U.S. and China tumbles in first half of the year
August 6, 2019 Category Foreign trade, Weekly
The total value of bilateral trade between the United States and China dropped by nearly 14% in the first half of the year versus the same period in 2018, data from the U.S. Commerce Department showed. In the first six months of the year, combining exports and imports as a measure of total trade between the U.S. and China, the total amount of goods exchanged was USD271 billion versus USD314 billion in 2018. As a result, China fell from being the top bilateral trading partner with the United States, and now ranks behind Mexico and Canada. “So tariffs are having an effect on bilateral trade,” said Michael Englund, Chief Economist at Action Economics in Boulder, Colorado. “It is a policy goal of reducing the trade deficit with China, but the reality is we will likely just shift to different countries, and as a result the U.S. might not see an overall change in the trade balance.”
Overall in June, the U.S. trade deficit narrowed by just 0.3% to USD55.2 billion, the Commerce Department said in its monthly statement. May’s trade data was revised to show a slightly smaller deficit of USD55.3 billion versus the USD55.5 billion initially reported. “China, to the extent that they have used management of their imports from the U.S. as an effective negotiating tool, well, they have cut those imports significantly. But their ammunition is limited because of the overall low level from years of avoiding U.S. imports,” Englund said. In the month of June alone, the goods trade deficit with China narrowed by 0.8% to USD30 billion, with imports falling 0.7% and exports largely unchanged.
“Given tariff activity, we have seen companies move production sources from China to other countries where possible,” said David Silverman, Senior Director at Fitch Ratings. “This will help avoid tariffs, though in some cases these companies could see higher manufacturing or shipping costs, and create execution risk related to new factory partners.” In the first half of the year, while U.S. trade with China shrank, it grew 2.8.% with Mexico to a total of USD309 billion. The trade deficit with Mexico reached a record in June. U.S.-Canada bilateral trade narrowed by 2% to USD307 billion, U.S. government data shows, as reported by the South China Morning Post.
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