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American Trade Deficits Overall And With China: The Twin Effects Of Technological Revolution And Global Value Chains

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  • HENRY WAN

    (Department of Economics, Cornell University, 470 Uris Hall, Ithaca NY 14853-7601, USA)

Abstract

Reality about US-China trade differs much from what is written. For the US, supplying vehicle currency for the growing world trade means a naturally rising over-all deficit, long before China's trade expansion. Improved transportation and communication cause fragmented production in lengthened supply chains. As the last production link, China's value-added share is miniscule to that of Japan or Korea, in China's exports to US (in gross value). Bilateral trade deficit to China is thus natural. This is intensified by China's amassing foreign reserves that suppressed RMB, diverted some trade from Mexico, etc., and shifted jobs long lost to the US. Over two decades, deficit to China has risen from 1/5 to 4/5 of deficit to all East Asia, yet with the latter falling from 100% to 2/3 of the over-all deficit.

Suggested Citation

  • Henry Wan, 2012. "American Trade Deficits Overall And With China: The Twin Effects Of Technological Revolution And Global Value Chains," China Economic Policy Review (CEPR), World Scientific Publishing Co. Pte. Ltd., vol. 1(01), pages 1-18.
    • Handle: RePEc:wsi:ceprxx:v:01:y:2012:i:01:n:s1793969012500021
    DOI: 10.1142/S1793969012500021
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    References listed on IDEAS

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    1. Barry Naughton, 2007. "The Chinese Economy: Transitions and Growth," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262640643, December.
    2. Steinfeld, Edward, 2010. "Playing Our Game: Why China's Rise Doesn't Threaten the West," OUP Catalogue, Oxford University Press, number 9780195390650.
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