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Annual Report: No. 3 China - Imports dominate U.S. trade

June 20th, 2006

A flood of imports from fast-growing China is changing the shape of U.S. trade.

When annual U.S. trade statistics are released, the spotlight these days turns to China – and the enormous distortions that mark the relationship between the Asian powerhouse and the United States.

In 2005, for example, the United States posted a $201.6 billion deficit in its trade with China, versus $161.9 billion in 2004. Imports rose 23.8 percent to reach $243.5 billion, up from $196 billion in 2004. The U.S. exported only $41.8 billion in goods to China.

This imbalance is led by U.S. imports of electronics such as computers, computer components and cell-phone parts. Increasingly, U.S. multinationals like Motorola, Honeywell and IBM are assembling their products in China for sale to U.S. consumers.

U.S. imports on computers alone topped $29 billion in 2005, a 22 percent increase from the year before. Imports of cell-phone parts were $12.4 billion while shipments of computer parts hit $10 billion.

U.S. footwear imports have also risen, to $7.5 billion from $6.9 billion a year earlier, while women’s apparel, including sweaters and pullovers, increased to $6.4 billion from just under $4 billion in 2004.

Other imports on the rise were furniture, television sets and computer monitors. The United States bought $7.3 billion worth of Chinese-made furniture in 2005, up 17 percent, while purchases of computer monitors skyrocketed 112 percent to $4.9 billion.

On the export side, top U.S. shipments to China in 2005 included aircraft, computers, soybeans and cotton.

Aircraft sales posted a robust showing, topping $3.8 billion. That compared to $1.6 billion in 2004. The United States sent China some $3.1 worth of computer chips, $2.3 billion in soybeans and $1.4 billion in cotton.

Some of the biggest export increases came in sales of steel and scrap iron, up 34 percent, and in computer parts, which rose 72 percent.

The U.S. West Coast continues to capture the lion’s share of Chinese trade as it enters the United States. Los Angeles is, by far, the No. 1 point of entry. Imports through Los Angeles valued $90 billion last year. The New York Customs District was a distant second, registering $27 billion in imports from China. And Chicago came in third, crossing the $20 billion mark in 2005.

China’s trade with Los Angeles rose 19 percent, while that with New York rose 23 percent and Chicago 22 percent. But Seattle posted an even bigger gain. The $18 billion in China-focused cargo in and out of that West Coast port was a 36 percent increase from a year earlier.

Some trade experts predict that the imbalance between the United States and China will continue – and perhaps even grow – because the Asian country keeps its currency, the yuan, undervalued to maximize the appeal of its exports. At the same time, key Asian and Southeast Asian countries that have been a source of U.S. imports, particularly electronic goods, are seeing their assembly businesses transferred to China.

The World Bank projects that the Chinese economy will continue its fast growth, expanding 9.2 percent in 2006. China’s economy grew nearly 10 percent in 2005, turning it into the world’s fourth biggest economy, leaping ahead of France and the United Kingdom.