The trade deficit with China is in the hundreds of billions of dollars a year. This is because we’re a big importer of Chinese goods and they don’t buy as much stuff back from us.
In return though, the Chinese loan us money (largely through the government) or conduct investment in American companies. But we’ve helped to make China a very wealthy country and while they still have a long ways to go to reach their full potential, they’re also starting to buy our crap.
This is for two reasons. One being that while the Chinese make clothes and McDonalds toys really well, Americans can still make complex machinery and such really well too. The other (and bigger reason) is that the emerging Chinese middle class will be bigger than the US and they’ve developed the appetite for consumption that makes America great.
The result is that US exports to China have increased substantially over the last few years. Part of this is due to currency fluctuations and that is likely to continue, but more can be attributed to the increased appetite.
Take the BMW X5 pictured above. BMW is a German company and makes most of its cars in Europe. But, the X5 is a large SUV and the big market for that car is here in the states. Some years ago BMW set up shop for the X5 in South Carolina (hence the graph above). The photo is of an X5 that was built in South Carolina and exported to China.
With increasing wages and the pressure of inflation on the horizon, China is now dealing with the same issues we have in the states. They import our food, our vehicles, and even our garbage. Our economies are so much more intertwined than a simple pie-chart that shows how much money they’ve loaned us. There will come a time when the trade deficit starts to reverse itself and that’s when China will really become a superpower.
Be sure the check out the report linked below. It breaks down US exports to China by state. For many states, China is a very important importer of their goods. For some (like Oregon) it’s the biggest importer. So when you roll your eyes at every product made in China you see, just know that somewhere someone in China is doing the same thing.
Report: US Exports to China By State via Economix
Photo: jiazi
 By The Weakonomist |
The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing I say can be construed as financial advice. |
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