On balance, US trade with China benefits Americans

Many Americans have been told that international trade—and more specifically, China’s trade relationship with the United States—is bad for workers and hurts US growth. Some American jobs have been lost. But, there are positives, too:

  • In 2016, US exports

    $169 billion and created

    910,000 US jobs

  • By 2030 , exports are expected to total

    $525 billion

  • With a US-China bilateral investment treaty, annual USexports would increase by

    $400 billion , creating

    170,000 new US jobs

  • Chinese investment projects cover

    98%

    congressional districts, across 46 states, creating

    140,000 American jobs

  • The US could receive

    $300 billion

    in investments from China,

    1 million American workers

    would be employed by Chinese-owned firms by

    2020

  • In 2016, a total of

    3 million Chinese tourists

    and travelers visited the US, supporting

    554,000 local jobs

  • In 2016, more than

    353,000 Chinese students

    studying in the US and contributing

    $15.9 billion

    to the US economy.

  • Trade with China saves American families about

    $850 per year.

    Typical US household income $56,500

    Trade relationship’s effect on consumer prices x  .015

    Yearly savings for typical American family = $850

How do the different states benefit from economic exchange with China?

Click on a state to find out.

What do some experts say?

  •  "If China can make bigger strides in relaxing market access for financial services companies, it will get active response from the US and European nations" more>>
  • “I think it’s important that China continues to open itself and widens the door if you will.” more>>
  • “U.S. exports to China have more than quintupled since China entered the WTO and have grown more quickly than imports. In fact, China is America’s fastest-growing export market.” more>>
  • “China and (the) U.S. will never have a trade war. Give Trump some time. He’s open minded.”  more>>
  • “Better statistics would go a long way to help us overcome myths and political gamesmanship, and instead identify and tackle the real problems in the U.S.-China trade relationship, which clearly exist.”  more>>
  • “In substance, Trump's bilateral deficit obsession is a relic from the mercantilist era. Historically, U.S. trade deficits began in the 1970s, not with China’s rise in the 2000s. Moreover, these deficits are multilateral, not bilateral.” more>>

Both Sides of the Story

China is often blamed for its trade imbalance with the US. But what’s the other side of the story?
Click on a card to find out.

  • The annual
    US-China trade
    deficit amounts
    to $367.4 billion.

    Statistics used to measure trade flow usually pin the entire trade value of a product to the last place it was exported from, even if its components come from other countries.

    more>>
  • America doesn’t benefit much from exchanges with China.

    The US runs a large trade surplus with China in services. Although small compared to the trade deficit in goods, this surplus is rapidly growing, increasing from an annual average of less than $2 billion from 2000-2008 to $37.4 billion in 2016.

    more>>
  • Most Americans don’t benefit from trade with China.

    Chinese products lower prices for US consumers by 1-1.5%. The benefits from Chinese trade allowed the average American household to save $850 in 2015, when median household income was $56,500.

    more>>
  • The US-China trade imbalance is deliberately caused by the Chinese.

    The US-China trade imbalance is not deliberately caused by the Chinese. It’s due to divisions in the global value chain and structural differences between the industries in the two countries.

    more>>
  • China is a currency manipulator that actively devalues the yuan to boost its own exports.

    In the past year, if there was any manipulation of the yuan by China, it was to prevent it from devaluing against the US dollar – the opposite of what it would need to do to boost its exports.

    more>>
  • Help President Trump Decide

    Some quarters in America have urged US President Donald Trump to engage in a trade war with China. Others have counseled him to work with China to reduce the trade imbalance.
    Which way should President Trump decide?

  • ● After the Section 301 investigation by US Trade Representative Robert Lighthizer, the US could decide to take protectionist measures against China. Tariffs could be imposed against Chinese goods and services, even perhaps the 45% tariff Trump proposed on the campaign trail.
  • ● Chinese imports to the US would decrease, and many jobs in China will be lost.
  • ● However, because of how much higher wages are in America, it’s unlikely this will result in many new US jobs. Instead, Americans will have to import goods from other countries, like Mexico and Indonesia.
  • ● Because Chinese goods are usually cheaper, however, buying goods from other countries will likely cost ordinary American consumers more. In the book, A Year Without “Made in China,” an American family vowed not to buy any made-in-China products for a year, but they found it increasingly difficult to meet basic living expenses.
  • ● China will retaliate by imposing tariffs on American goods and services, resulting in a loss of many American jobs, particularly in services.
  • ● Relations between both countries will suffer considerably, making it much harder for them to work together on issues of common concern like regional security and climate change.
  • ● The US could decide to work with China to reduce the trade imbalance, something the latter has said it’s open to doing.
  • ● China could be persuaded to increase imports from the US.
  • ● Because China has a lot less arable land compared to the size of its population, it makes sense for it to import more agricultural produce from the US, including rice, chicken, and beef.
  • ● Since the US is now a net exporter of oil, China could import more of its oil from America, instead of from, say, Saudi Arabia.
  • ● There is a great demand in China for high-tech American products. However, the US has export restrictions on some high-tech products to China. For example, China imported $227 billion worth of semi-conductor chips from around the world in 2016, but only 4% came from the US because of US export barriers. If the US were to liberalize export controls on China to the level of control applied to Brazil, the trade deficit could drop by as much as 24%. Easing such restrictions would also result in growth in high-skilled jobs in America.
  • ● President Trump has pledged to increase spending on American infrastructure, but has limited funds to use for that purpose. A possible source of these funds is China. Chinese national savings exceed 40% of GDP each year.The US could be a major investment destination. Whilst there are legitimate national security concerns about foreigners owning US infrastructure, the fact is that this infrastructure is located in the US, and its government could always intervene if national security is threatened.
  • ● To this secure infrastructure investment, the US and China could even sign a bilateral investment treaty, including provisions for any possible disputes.
  • ● Relations between both countries will improve, making it much easier to work together on global problems.
  • ● The US could take any unresolved disputes with China to the WTO Dispute Settlement body. This body could punish China for any practices that violate its treaty obligations. China would have to abide by its rulings or risk its trade privileges.
  • China’s Progress: Technology Transfer & Market Access

    China has often been accused of making foreign companies transfer technology to local entities, and of limiting access to its market. These accusations have some truth to them.
    However, China is working to change this.

    Success Story

    CHINA-US Auto Trade

    The US believes that China’s auto market is not as open as the US, but in fact, US auto companies have benefited greatly from economic and trade cooperation with China.

    In 2016, China imported 255,000 automobiles from the US, amounting to US$12.12 billion. While the US imported 54,000 automobiles from China, amountingto US$1.18 billion, they were mainly produced by US-funded companies in China. According to China Association of Automobile Manufacturers (CAAM), China’s joint venture enterprises with three major brands, i.e. GM, Ford and Fiat Chrysler, had sold 5.1 million automobiles in 2016.

    China’s Progress: From Imitator to Innovator

    For many years, China has been viewed as an imitator, known for cheap, derivative products. In recent years, however, China is becoming more of an innovator. Chinese nationals are now writing new apps, creating new devices, and designing new clothes. China recognizes that it’s in its interest to support a robust intellectual property framework, as its own inventions and brands need protection too. Click a tab to find out more about China’s progress in this area.

    China’s Science Revolution

    China is super-sizing science.

  • FAST Radio Telescope
    FAST Radio Telescope
  • Pig's-eye View
    Pig's-eye View
  • The Neutrinos Hunt
    The Neutrinos Hunt
  • Race to the Deep
    Race to the Deep
  • BeiDou Navigation Satellite System
    BeiDou Navigation Satellite System
  • KJ-2000 Airborne Early
    KJ-2000 Airborne Early-warning and Control Aircraft
  • Tianhe-2 Supercomputer
    Tianhe-2 Supercomputer
  • JF12 Shockwave Hypersonic Wind Tunnel
    JF12 Shockwave Hypersonic Wind Tunnel
  • Super Steel
    Super Steel
  • Lunar Exploration Program
    Lunar Exploration Program

    2017 Nature Index: Countries

    China is the second-biggest producer of top-cited research papers in the world, according to the 2017 Nature Index. One out of five scientific papers from the top Chinese institutions, including the Chinese Academy of Sciences, Peking University and Tsinghua University, were ranked among the world’s best.

    Source:2017 Nature Index

    2017 Nature Index: Institutions

    The Chinese Academy of Sciences is now ranked by the Nature Index as the top research institution in the world, overtaking Harvard University and the Max Planck Society of Germany.

    Source: 2017 Nature Index

    "Made in China 2025" -- China's "Industry 4.0"

    “Made in China 2025”, known as China’s “Industry 4.0”, is an initiative aiming to transform the country from a low-end manufacturing power into a medium to high-end manufacturing one. The priority sectors include new-generation IT, aviation and space equipment, and energy-saving and new energy vehicles.

    • Aviation & Aerospace

    • Agriculture

    • Electrical Power

    • New Energy Automotive

    • High-End Robotics

    • Next Gen Information Technology

    • New Materials & Composites

    • Rail Transportation

    • Maritime Engineering

    • Biomedical & Advanced Medical Equipment

    PCT Application Ranking in 2016 (by country)

    In 2016, Chinese companies submitted 43,168 PCT applications, up by 44.3%, ranking the 3rd in the world, next only to the United States (56,595) and Japan (45,239). China is likely to overtake the US in two years.

    Source: World Intellectual Property Organization (WIPO)

    PCT Application Ranking in 2016 (by company)

    By far, ZTE Corp owns more than 68,000 PCT patents in total, among the top 3 in the world for seven consecutive years. Huawei Technologies Co had won more than 55,000 domestic and international patents by the end of 2016; it was ranked the 8th on the 2016 EU Industrial R&D Investment Scoreboard.

    Source: World Intellectual Property Organization (WIPO)

    Proportion of R&D Spending in Global Total (by country)

    In 2013, global spending on research and development amounted to $1.671 trillion. The US stayed at the top, and China was the second, with R&D investment reaching $336.5 billion. China's R&D investment increases by an annual rate of 18.3%, far higher than the average of 1.4% among the developed nations.

    Sources:Science & Engineering Indicators 2016 of the National Science Board

    From 1995 to 2015, US' cumulative investment in research and development was $7.1 trillion

    The $7.1 trillion of R&D investment by the US is about 2.5 times China's investment.

    Sources: The National Science Board, Science & Engineering Indicators 2016; Organization for Economic Cooperation and Development; BCG analysis
    Note: Total R&D expenditures are measured in current prices, purchasing power parity.

    China is projected to spend up to twice as much as the US on development research by 2018

    The US is the global leader in basic and applied researches. China's R&D investment is rising fast. China's expenditure in late-stage R&D is expected to reach $658 billion in 2018, twice the amount of the US.

    Sources: The National Science Board, Science & Engineering Indicators 2016; Organization for Economic Cooperation and Development; BCG analysis
    Note: Total R&D expenditures are measured in current prices, purchasing power parity.

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