Why is the US trade deficit with China so big?
For two reasons. China has become a huge manufacturer of technological products as well as less complex consumer items. It makes everything from hardware to soft toys. US retailers have rushed to get their goods made there because of the low cost. The second reason is that the Chinese currency, the yuan, is very cheap. Some US officials say it is undervalued by about 40%. That makes the export of goods made in China very cheap as well. Last year, China exported to the US about $200bn more than it imported. What does the US want doing about the trade deficit? It would like China to buy more goods in the US (and China has announced the purchase of 80 Boeing aircraft) but more fundamentally it wants China to revalue the yuan, thereby making it more expensive to buy things there. China has made some moves in this direction but not, in the US view, enough. A US official said recently that China should become a “responsible stakeholder” in the world trade system. Are the two countries in a r
