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What we import from China

February 7, 2018
Derek Scissors
China Beige Book

But he can’t keep saying China is ripping us off and he’s going to stop it unless the US targets the biggest imports. The trade deficit with China is bigger than with the next eight countries combined. NAFTA? The trade deficit in cell phones and computers alone with China is bigger than the trade deficits for all goods with Mexico and Canada combined.

The first year of the Trump presidency saw a record US merchandise trade deficit with China, $375 billion. Exports were the most ever. Unfortunately for the president, so were imports, breaking $500 billion. Even in Washington, half-a-trillion is real money, especially if it will be followed by more of the same.

What is the US buying? One of the many annoying things about trade is all the ways there are to slice up the numbers. Using “3-digit SITC,” because it rolls so trippingly off the tongue, here are the top 10 goods imports from China last year:

This is over half of all imports. Banning a product not on this list — not slapping with high tariffs, banning outright — would cut the trade deficit only 3% or less.

Steel, for example, gets a lot of attention. Combined 2017 steel and aluminum products from China were worth barely half as much as radios. Getting rid of them entirely would leave the bilateral trade deficit at $370 billion, still a record. Solar panels, which have already been hit with tariffs, are so unimportant they don’t even have a category.

So steel and solar don’t matter at all to the trade deficit. Nor does it help to talk about how China should buy more US exports. The last five years of exports to China read $122 billion, $126 billion, $116 billion, $116 billion again, and $130 billion last year. This year isn’t suddenly going to see $250 billion. If we’re lucky, it will see $150 billion.

That probably won’t keep up with 2018 imports. The Republican tax plan is bad for national debt but should put more money in people’s pockets. More money means more spending, including on imports. A rise in US exports to China to $150 billion would be 15%. A 15% rise in imports from China would be $75 billion, meaning a $430 billion deficit this year.

It would be perfectly reasonable for the president to say, “If Americans are buying more things made in China because they have more money, there’s no problem.” A lot of people would agree with that, for good reasons.

But he can’t keep saying China is ripping us off and he’s going to stop it unless the US targets the biggest imports. The trade deficit with China is bigger than with the next eight countries combined. NAFTA? The trade deficit in cell phones and computers alone with China is bigger than the trade deficits for all goods with Mexico and Canada combined.

There are of course drawbacks to restricting cell phone, computer, and toy imports — people will have to pay more for those things. Unlike steel, exporting those goods is truly important to China and they can retaliate against US soybeans, for example. Eggs have to get broken before the omelette gets made.

Until then, until the main Chinese exports are addressed, “trade war” talk is much ado about nothing. For better or worse, until the Trump administration targets China-made cell phones, computers, toys, furniture, and clothing, US trade numbers will look pretty much the same.

Derek Scissors

Derek Scissors

Chief Economist
China Beige Book
  • China Beige Book International.
  • Oversees the firm’s data analytics operations as well as China Beige Book’s proprietary database, which is now the largest private database in the world on the Chinese economy.
China Beige Book

China Beige Book

Reliable data on China’s economy are notoriously difficult to come by. Official Chinese government figures exist, but lack transparency and credibility, while the few private indicators that exist are far too limited in size and scope for strategic planning.

We founded China Beige Book International in 2010 to help institutional investors and corporate CEOs navigate China’s notoriously black box economy. Today we operate the largest private in-country data-collection network ever developed to track the Chinese marketplace, gathering real-time economic data from thousands of firms across all of China’s regions, sectors, and 34 discrete industries.

Our flagship platform provides independent data and in-depth analysis on every key component of China’s diverse economy—from growth dynamics to labor market and inflation trends to the world’s only tracker of the credit environment and shadow banking.

These data are the principal drivers of our advisory work, allowing our globally-recognized team of experts to guide clients through the noise while staying ahead of critical market-moving trends in the world’s second-largest economy.

Channels

AsiaStrat
Granite Peak Advisory
Track Research
Trivium China
Gao Feng
Real Estate Foresight
China Beige Book

All Analyses by

China Beige Book

What we import from China

What we import from China

But he can’t keep saying China is ripping us off and he’s going to stop it unless the US targets the biggest imports. The trade deficit with China is bigger than with the next eight countries combined. NAFTA? The trade deficit in cell phones and computers alone with China is bigger than the trade deficits for all goods with Mexico and Canada combined.

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A world of debt mortgages our economic future

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Is China's Economic Power a Paper Tiger?

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Leland Miller on Pressing China Issues

Leland Miller on Pressing China Issues

The Chinese economy is strange in many ways. Not only is it a hybrid between private capital and state control, but very few people directly invest in the mainland — and yet everybody is interested in how the second largest economy in the world is going to develop. That’s because Chinese demand determines the prices of world commodities, and the operations of multinational companies in China impact earnings. When the yuan falls, markets across the world get jittery. China watchers accept the fact that official Chinese data is severely flawed, and often simply fabricated, yet they still use it to analyze the Chinese economy and markets because there are few alternatives. One alternative, however, is the China Beige Book International (CBB), a research service that interviews thousands of companies and hundreds of bankers on the ground in China each quarter. They collect data and perform in-depth interviews with Chinese executives.

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'Trump's tariffs just first shot—the big China action is Section 301'

Leland points out that President Trump's really big trade move against China yet to come, that is, Section 301 penalties. If you aren't up to speed on 301, you will be after you read and watch Leland's comments. As Leland says, with Section 301, 'regardless of how Section 232 steel and aluminum tariffs end up in the next few days - you're seeing the beginning, not the end, of Trump's aggressiveness on trade.' 'And, I don't think people have prepared themselves yet for the fact that 301 is coming.'

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Will Chinese Commodities Derail The Global Reflation Trade?

For over a year, commodities bulls have feasted on China. In the aftermath of the recent Communist Party Congress, many investors are now drooling over the prospect the boom will continue, based on Beijing’s promises to supercharge its campaigns against overcapacity and pollution this winter. If such pledges are fulfilled, the thinking goes, substantial chunks of steel, aluminum, and other refining capacity will be taken offline, rebalancing markets and providing rocket fuel to already frothy prices. 2018 could prove to be an even more amped-up version of 2017.

Derek Scissors

Derek Scissors

Chief Economist
China Beige Book
  • China Beige Book International.
  • Oversees the firm’s data analytics operations as well as China Beige Book’s proprietary database, which is now the largest private database in the world on the Chinese economy.
China Beige Book

China Beige Book

Reliable data on China’s economy are notoriously difficult to come by. Official Chinese government figures exist, but lack transparency and credibility, while the few private indicators that exist are far too limited in size and scope for strategic planning.

We founded China Beige Book International in 2010 to help institutional investors and corporate CEOs navigate China’s notoriously black box economy. Today we operate the largest private in-country data-collection network ever developed to track the Chinese marketplace, gathering real-time economic data from thousands of firms across all of China’s regions, sectors, and 34 discrete industries.

Our flagship platform provides independent data and in-depth analysis on every key component of China’s diverse economy—from growth dynamics to labor market and inflation trends to the world’s only tracker of the credit environment and shadow banking.

These data are the principal drivers of our advisory work, allowing our globally-recognized team of experts to guide clients through the noise while staying ahead of critical market-moving trends in the world’s second-largest economy.

Channels

AsiaStrat
Granite Peak Advisory
Track Research
Trivium China
Gao Feng
Real Estate Foresight
China Beige Book