How Trade with China Benefits the United States (2024)

FAQs

How Trade with China Benefits the United States? ›

Why it matters: The United States imports roughly half a trillion dollars in goods from China, including clothing, shoes, electronics, furniture, and household appliances. Those imports help improve the lives of many Americans, particularly those in low-income households who benefit from lower prices on everyday goods.

Today, the United States imports more from China than from any other country, and China is one of the largest export markets for U.S. goods and services. This trade has helped the United States in the form of lower prices for consumers and higher profits for corporations, but it has also come with costs.

Today, the US-China trade relationship actually supports roughly 2.6 million jobs in the United States across a range of industries, including jobs that Chinese companies have created in America.

Trade relations

Despite the rising tensions, trade between the countries remains extremely strong. China is America's third-largest trading partner, after Canada and Mexico. U.S. imports of goods and services from China hit a record $563.6 billion last year.

Trade allows U.S. consumers to buy a wider variety of goods at lower prices, raising real wages and helping families purchase more with their current incomes.

Low prices: One of the biggest advantages of importing from China is the cost. The prices of products are usually lower in China compared to other countries. This means businesses can purchase products at a lower price and increase their profit margin.

The need to provide employment for people who had depended on the sea for their livelihood, the need to continue importing manufactured goods as yet unavailable from American sources, and the need to generate capital for development stimulated the development of a new kind of foreign trade.

More specifically, they conclude that direct competition with Chinese imports resulted in manufacturing sector job losses of, on average, 0.39% a year. This figure rose to 0.63% when upstream exposure was also included.

China is currently our largest goods trading partner with $559.2 billion in total (two way) goods trade during 2020. Goods exports totaled $124.5 billion; goods imports totaled $434.7 billion. The U.S. goods trade deficit with China was $310.3 billion in 2020.

In a very simplistic world, if America stops trading with China, China lose that ($462–$115) = $347B of GDP or 3.1% of the overall GDP. China's GDP is expected to grow at 6%/yr.

What kind of trade relationship does the US have with China? ›

The U.S. trade with China is part of a complex economic relationship. In 1979 the U.S. and China reestablished diplomatic relations and signed a bilateral trade agreement. This gave a start to a rapid growth of trade between the two nations: from $4 billion (exports and imports) that year to over $600 billion in 2017.

Resources and energy also play an important role in the China-Australia investment relationship. China is an important source of foreign investment in Australia. Foreign investment in Australia means greater infrastructure, more productivity and more jobs for Australians.

Low corporate tax: Corporate tax in China is typically 25%, which is more than corporate tax in the UK, but much less than corporate tax in India, Mexico or Brazil. Easy port access: A large number of world-class seaports make Chinese products easy to export.

Consumers benefit from lower prices.

Free trade reduces the price of imported goods. This enables consumers to enjoy increased living standards. After the purchase of imports, they have more left over income to spend on other goods. Free trade can also lead to increased competition.

Canada was the largest purchaser of U.S. goods exports in 2022, accounting for 17.3 percent of total U.S. goods exports. The top five purchasers of U.S. goods exports in 2022 were: Canada ($356.5 billion), Mexico ($324.3 billion), China ($150.4 billion), Japan ($80.2 billion), and the United Kingdom ($76.2 billion).

Despite the severity of the simulated Chinese growth shock, the effects on real GDP growth in the United States, the Eurozone, and Japan may be minor. The minor effect on economic growth in major economies is due to their limited export exposure to China.

Not all countries benefited, though. Some — notably Vietnam, Thailand, Korea and Mexico — were able to boost exports significantly, in part by providing substitutes for goods subject to the U.S.-China tariffs.

More specifically, they conclude that direct competition with Chinese imports resulted in manufacturing sector job losses of, on average, 0.39% a year. This figure rose to 0.63% when upstream exposure was also included.

It protects the domestic manufacturers from unfair competition. It increases the demand for domestic goods. It improves trade deficits. It acts as a punishment to those countries with unfair trade practices.