Economic Indicators | Trade and Globalization

U.S. trade deficit up in 2011; China accounted for three-fourths of rise in non-oil goods trade deficit

The U.S. Census Bureau reported today that the U.S. trade deficit in goods and services increased from $500 billion in 2010 to $558 billion in 2011, an increase of $58 billion (11.6 percent). Although the United States had a surplus in services trade, which increased by $33.2 billion (22.8 percent) in 2011, that surplus paled in comparison to the U.S. trade deficit in goods trade, which increased from $645.9 billion to $737.1 billion in 2011 (an increase of $91.2 billion or 14.1 percent).

Increased net imports of crude oil and refined petroleum products were responsible for about two-thirds ($61.3 billion) of the growth of the U.S. trade deficit in goods. Growth of the goods trade deficit in 2011 has slowed the recovery and suppressed domestic job creation, as domestic demand for goods has been absorbed by exporters, particularly those in China and in oil-exporting nations.

The U.S. trade deficit in non-oil goods—a deficit dominated by trade in electronics, autos, auto parts, and other manufactured products—increased from $369.7 billion in 2010 to $399.7 billion in 2010, an increase of $30.1 billion (8.1 percent). The U.S. trade deficit with China, which is dominated by trade in non-oil manufactured goods, increased from $273.1 billion in 2010 to a record $295.5 billion in 2011. This $22.4 billion (8.2 percent) growth in the overall U.S. trade deficit with China was responsible for three-fourths of the growth in the U.S. trade deficit in non-oil goods (conservatively estimated).

According to a 2011 Economic Policy Institute report, the growth in the U.S. trade deficit with China displaced 2.8 million U.S. jobs between 2001 and 2010 alone. One of the most important causes of an increasing U.S. trade deficit with China is China’s illegal manipulation of its currency. As EPI’s Josh Bivens has noted, the U.S. needs a firm and effective set of policies to confront China’s currency manipulation, but the administration and Congress repeatedly have refused to get tough with China.

China is also targeting a range of U.S. industries with subsidies and other illegal trade restrictions, recent reports show. For example, the Chinese auto-parts industry (including domestic and foreign-owned plants in China) has received $27.5 billion in government subsidies since 2001, and China’s central government has committed an additional $10.9 billion in aid through 2020. Up to 1.6 million U.S. jobs in the U.S. auto-parts industry are at risk in the coming decade due the threat of rapidly growing subsidized U.S. imports from China.

China’s illegal currency manipulation and unfair trade policies should be at the top of the agenda when Chinese Vice President Xi Jinping visits next week. Instead, news reports will likely be dominated by a few carefully orchestrated sales of big-ticket U.S. goods to Chinese buyers. We should beware of visitors bearing “gifts.” As noted by Alliance for American Manufacturing President Scott Paul, “China’s economic policies—subsidies, state owned enterprises, intellectual property theft, forced technology transfer, currency manipulation—are now the single largest impediment to job growth in America.” The United States cannot afford to wait any longer to address these policies.

The author thanks Josh Bivens for advice and comments and Natalie Sabadish for research assistance.

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