US and China's Trade Deficit Narrows by Almost 30 Billion

Matty-Sways

As the signing of Phase One nears, reports show the trade deficit is shrinking.

China’s widening surplus supplied ammunition to the US to start round after round of tariffs on the country’s goods to get Beijing to correct what it called unfair trade practices. The trend is set to reverse, with the two countries poised to complete the first phase of a trade deal.

Chinese customs data on Tuesday showed that the country had a trade surplus with the U.S. of $295.8 billion last year, compared with a record $323.3 billion in 2018. The figures represent China’s first full year of trade data since the trade war began.

China’s 12.5% decline in exports to the U.S. last year would have narrowed the U.S. deficit more, but Chinese imports from the U.S. dropped even faster. Beijing retaliated against Washington, imposing tariffs on American goods and directing state-owned companies to buy less from what had been its largest single-nation trading partner. China’s imports from the U.S. fell nearly 21%.

Now that China has promised in an imminent trade pact to buy more from the U.S., though it hasn’t specified by how much, its trade surplus with the U.S. should narrow further, economists say. Washington, has agreed to remove some of its tariffs on China. Still, 25% punitive levies on $250 billion in Chinese goods, or about half of what China sells to the U.S. each year, remain in place. That could continue to curb American demand for Chinese goods.

“The tariff rollbacks are fairly marginal compared with tariffs that remain in place,” Julian Evans-Pritchard, from Capital Economics, said of the U.S. concessions. “On the import side, China’s committing to quite a big step up.”

President Trump and Chinese negotiators are scheduled to sign their pact Wednesday in Washington. U.S. officials have said Beijing will increase purchases of U.S. goods and services by at least $200 billion over the next two years from 2017 levels.

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