Studies show that in 2019, the US trade imbalance with China was about $346 billion. This was 19 percent less than the one in 2018, which was a deficit of $420 billion. The US mostly imports computers, cell phones, toys, and sporting materials from China, while China imports from the US include commercial aircraft, soybeans, and semiconductors. However, after the trade war started by US President Donald Trump, the Chinese government canceled soybeans imports from the US in 2018. In 2019, soybean exports from the US to China reduced from $13billion to $9 billion.
This persisting trade deficit between the US and China could negatively affect the economy of the US As explained by Nasir & Leung (2019), the trade imbalance tends to give China the competitive and political advantages over the fiscal policy of the US For instance, the trade imbalance has made China the biggest lender to the US government as it has bought so many Treasury notes from the US government. China has assisted in maintaining the US interest low by buying the treasures. If China stops buying the treasury’s, the US interest rate would rise and extensively affecting the US economy and this can put the US into recession. Additionally, the trade imbalance affects US companies since they cannot compete with Chinese goods and services that are cheaper. US companies are forced to lower their cost or risk going out of business. Many US companies have reduced cost by outsourcing jobs to China and India. The trade imbalance between China and the US has also significantly reduced the manufacturing jobs by almost 28 percent. Furthermore, economists and financial experts warn that the US trade deficit with China if continues the US dollar will fall against a bucket of other currencies, and this would negatively affect the US foreign exchange rates.
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References
Nasir, M. A., & Leung, M. (2019). US trade deficit, a reality check: New evidence incorporating asymmetric and nonlinear effects of exchange rate dynamics. SSRN Electronic Journal . 10.2139/ssrn.3439302.
