Thursday morning, the BEA released the latest US trade deficit data. The US trade deficits were up, led by our growing trade deficit with China. China is the black-hole in American economic policy. American demand goes into China, but very little is reflected back.
Despite estimates that overall demand in China is rising at an 8% clip while demand in America is stagnant, our monthly trade deficit with China rose by $2.0 billion in July. Not only were our imports from China up, but our exports to China were down.
Specifically, our imports from China were up by from $24.0 billion in June to $25.7 billion in July while our exports to China were down from $5.5 billion in June to $5.3 billion in July. (Note: These statistics are not seasonally-adjusted and they do not include services, just goods.)
At the beginning of July, the Chinese government illustrated its complete control over what gets imported from the United States when it stopped issuing import licenses to purchase American chicken products (13% of all of our exported chicken) as part of a dispute with the United States over import of Chinese cooked-chicken products.
At the end of July, Treasury Secretary Geithner and Secretary of State Hillary Clinton visited China as part of an ongoing strategic dialogue. They were shunted over to low-level officials, and Geithner was full of smiles as he presented them with an autographed basketball. Steve Levine summed up the failure of the summit in his Business Week blog when he wrote:
Again and again in briefings with reporters, both the U.S. and Chinese delegations said that they had expressed – and retained – their respective opinions on a multitude of issues, including the Chinese currency (the U.S. thinks its value is artificially suppressed; the Chinese say that’s nonsense but whatever the case they aren’t shifting monetary policy); on climate change (the U.S. wants Beijing to commit to specific greenhouse gas reductions; the Chinese say forget it until the West considerably reduces its own output, and provides the technology for developing countries to accomplish the shift); plus on political questions including North Korea and Iran.
The Obama administration will pretend to be doing something when they apply tariffs on some specific Chinese-government-subsidized exports such as tires and steel pipe. But there is no indication, whatsoever, that the Obama administration will insist that China balance their trade with us. The administration's strategy is to smile while the Chinese government spits on them.
Disclosure: No Positions
