On August 9, the Census Department published the trade data for June, the 29th consecutive month in which the US merchandise trade deficit with China has worsened and the 20th consecutive month that it has set a record low. The US merchandise trade deficit with China was $307 billion over the 12 months ending in June 2012, as shown in the graph below:
Even though the US, like any other trade-deficit country, could require balanced trade under WTO rules, the Obama administration has let the Chinese government keep out American products through a wide variety of tariff and non-tariff barriers. As a result, manufacturers are rarely able to produce in the United States and sell to China.
Instead, manufacturers access the Chinese market by building factories in China where the government requires them to give their proprietary technologies to their Chinese competitors. For example, since September 2011, General Motors (NYSE:GM) has agreed to give its state-of-the-art electric battery and Cadillac technologies to SAIC, its Chinese partner and competitor, in order to sell electric and luxury cars to the growing Chinese market.
The Obama administration has focused its efforts to level the playing field upon the yuan-dollar exchange rate, which the Chinese government manipulates in order to give its producers a 25% to 40% hidden tariff upon American products and a 25% to 40% hidden subsidy on products sold in the US.
Since President Obama took office, the Chinese government has moved its currency toward balance at a snail's pace. After not budging during 2009, it strengthened the yuan by 3.5% in 2010 and 4.5% in 2011. Since the beginning of 2012, it has regressed, weakening the yuan by 1.0% vs. the dollar.
China's growing trade surplus with the United States provides its economy with a continuing stimulus, while the worsening US trade deficit with China depresses US economic growth and prevents the US manufacturing sector from recovering to pre-2009 levels. The Chinese government is growing its economy by beggaring the US economy, while the Obama administration lets it do so.
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