US Commerce Deficit With China Smallest Since 2010?

U.S. President Joe Biden claimed through the June 27, 2024, debate towards his Republican opponent Donald Trump that below Biden’s administration, the U.S. commerce deficit with China had dropped to its lowest degree in 14 years:

Right here is Biden’s precise quote, pulled from a debate transcript:

We’re [sic] the bottom commerce deficit with China since 2010. 

This declare has appeared on social media platforms, especially on X, since February 2024.

A rustic’s commerce surplus or deficit is the results of a easy subtraction: exported items minus imported items. A commerce surplus means a rustic is promoting extra items and providers than it’s shopping for from its buying and selling companions. Because the U.S. and China vie for energy on the worldwide scene, and as a fearful citizens typically responds properly to protectionism, politicians may use a surplus or a smaller deficit as a marketing campaign argument to defend their report, utilizing it as a measure of their means to scale back their nation’s dependence on different nations. 

Biden’s declare is true. Based mostly on government data, we created the next chart monitoring the U.S. commerce deficit with China from 2010 (below President Barack Obama) to 2023. In 2010, the U.S. had purchased $273 billion value of products greater than it bought to China — the world’s manufacturing chief. This commerce deficit soared below Trump at $418 million. Whereas it rose in 2021 and 2022 because the world caught up on commerce after the COVID-19 pandemic, it dropped once more in 2023 to $279 billion:

(Census.gov)

The query of whether or not a commerce deficit issues is up for debate, nonetheless. Whereas some economists consider it to be an issue, many disagree, arguing as a substitute {that a} excessive commerce deficit could be a signal of a powerful economic system and urge world leaders not to make it a flashpoint of political strife (archived). 

These economists consider that the cash a rustic spends on items from different nations will typically return to its shores, typically through monetary markets. These “capital flows” within the type of overseas investments into the nation, they consider, will help maintain the home economic system. And in reality, web overseas possession of U.S. capital has grown steadily from $2.5 trillion in 2010 to $21.3 trillion within the first quarter of 2024, in accordance with the St. Louis Federal Reserve.

This logic has borne true below Biden, because the U.S. economy has largely outpaced the economies of the West since 2021.

Sources