The United States’ two-way trade with other nations spiked in 2022, new federal data show, including trade with China despite increasing friction between the world’s two largest economies.
Even while posting record-high exports to 73 countries in 2022, the U.S. still ran a trade deficit of $1.19 trillion, up $101 billion from 2021, the U.S. Commerce Department said this week. The deficit reflected the fact that the U.S. also recorded record-high imports from 90 countries.
U.S. imports from China reached $537 billion in 2022 compared with $505 billion the previous year. The U.S. sold a record-high $154 billion in exports to the Chinese market, up slightly from $151 billion the previous year. The net trade deficit with China for 2022 was $383 billion.
The data, released Tuesday, came out just hours before U.S. President Joe Biden delivered the State of the Union address in which he promised to boost domestic manufacturing, to use only U.S.-made materials for a spate of infrastructure projects, and to remain focused on “winning the competition” against China.
However, what “winning” looks like may be difficult to determine.
Politics versus reality
Relations between the U.S. and China worsened during the past week, after Biden ordered the U.S. military to shoot down what intelligence officials said was a Chinese espionage balloon that had floated across the U.S. Prior to the shoot-down, U.S. Secretary of State Antony Blinken canceled a scheduled trip to Beijing.
The balloon incident followed months of rising tensions and calls from many U.S. officials for a “decoupling” of the Chinese and U.S. economies and “reshoring” of key manufacturing to the U.S. But while the Biden administration may be able to use preferential purchasing treatment to shut Chinese construction materials and other goods out of U.S. infrastructure projects, experts said there is little evidence of broader separation between the U.S. and Chinese economies.
“Regardless of the political rhetoric, which is tending towards a kind of rigid and suspicious environment between China and the United States, the practical moves on the ground from a business and commerce perspective show that there is a deep and sustained connection between the Chinese and U.S. economies,” Claire Reade, a senior counsel with the law firm Arnold & Porter and former assistant U.S. trade representative for China affairs, told VOA.
Mark Kennedy, director of the Wilson Center’s Wahba Institute for Strategic Competition, agreed, saying, “There has not been a broad-based decoupling … and many economists are seeing that there really hasn’t been a significant onshoring or reshoring. There are still strong ties, and to break those ties with China would be both difficult and costly.”
Trade as ‘ballast’
Craig Allen, president of the U.S.-China Business Council, told VOA it’s a good sign that trade between the U.S. and China has been persistently strong despite the imposition of tariffs by both sides and the Biden administration’s recent move to block the sale of cutting-edge microprocessors to China.
“Trade has acted as an important ballast in the relationship between Washington and Beijing in the past, and I think it’s still the case,” he said via email. “Competition is surely defining the contours of the relationship at the moment, and we hope that the relationship doesn’t sour any further as a result.”
“I think, to that point, this new data can be a silver lining,” said Allen. “Even though the United States and China are competing with one another, this last year of data and the growth in U.S. exports to China really shows that we can simultaneously maintain a trading relationship that benefits Americans.”
A delicate balance
Reade said the Biden administration, in its effort to privilege American manufacturers over Chinese firms, will face a difficult challenge. Insulating American companies from non-U.S. rivals could make them less able to compete internationally or could lead to tit-for-tat protectionism against U.S. firms.
At the same time, she said, there is strong evidence that many large Chinese firms, including those that manufacture the kinds of goods used in major infrastructure projects, receive favorable treatment from the Chinese government that insulates them from market pressures, unfairly advantaging them over competitors.
“To the extent the competition is not fair competition, it is also legitimate to not allow destructive price undercutting that decimates legitimate industries,” she said.
US economic strength
Looking beyond the U.S.-China relationship, experts said that much of the explanation for the rising trade deficit has to do with the relative strength of the U.S. economy compared with those of many of its trading partners. A strong dollar makes foreign goods and services more affordable for Americans, while making U.S.-made goods and services more expensive overseas.
“The big takeaway is that when you’re running a high-pressure economy, which the U.S. is, you’re going to import a lot of stuff,” Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, told VOA. “And that’s exactly what has happened. You’ve got the unemployment rate down to 3.4% and two job vacancies for every worker unemployed … that really speaks to just high-pressure demand.”
Although China was the largest source of imports to the U.S. in 2022, Canada and Mexico were the United States’ largest two-way trading partners. The countries share lengthy land borders with the U.S. and participate in a three-way free trade agreement. Total U.S.-Canada trade was $794 billion in 2022, and U.S.-Mexico trade was $779 billion.
After Canada, Mexico and China, Japan was the next largest of the United States’ trading partners, with $229 billion in goods trading hands last year.
The U.S. did $903 billion in two-way trade with the nations of the European Union in 2022, with the largest share, $220 billion, between the U.S. and Germany.
Other large two-way trading partners in 2022 were South Korea at $187 billion; the United Kingdom at $141 billion; Vietnam at $139 billion; Taiwan at $136 billion; and India at $133 billion.
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