INTERNATIONAL TRADE

International Trade: China and U.S.



International Trade: China and U.S.

Introduction

The importance of trade enhancement to US has not changed, even if trade structure has itself undergone major transformations that have shaped, and been shaped by major events in US history. Trade traditions on the North American continent, and especially in the USA, have historically been major sources of competitive advantage and national identity, forging the US social and political psyche on such matters as innovation, entrepreneurship, efficiency, stewardship, and the pioneering spirit. This essay presents a broad snapshot of the trade analysis of US with China and its impact on the economy of both countries.

Trade Balance between US and China for Recent Five Years

Trade balances between U.S. and China for recent five years are listed below.

Trade Balances with China for US Total All Merchandise

Year

Trade Balance Deficit

2005

-202,278,094,672

2006

-234,101,344,269

2007

-258,505,975,358

2008

-268,039,790,280

2009

-226,877,204,877

2010

-273,063,241,072

Source: International Trade Administration (2011)

Trade balance deficit of U.S. has shown a continuous increase in past five years with China, except a marginal decline in year 2009. The total value of trade in goods and services has exhibited a medium level of volatility over the current analysis period. This measure is sensitive to factors, such as exchange rates, domestic consumer confidence and income, and global economic conditions (IBIS World, 2011a). Major sectors of trade balance include computer and electronic products, apparel manufacturing products, miscellaneous manufactured commodities, electrical equipment, appliances & components, leather & allied products, and furniture & fixtures.

Impact of Foreign Trade on US and China's Economic Growth

Foreign trade between china and US directly impacted their economic growth. U.S. being the largest export market for China proved to be a valuable opportunity for Chinese manufactured goods. China's economy continued the robust growth it has experienced for the last few decades, growing 11.3% in 2005, 12.7% in 2006 and 14.2% in 2007. China's strong growth has come mostly from the rapid industrialization of its manufacturing sector (IBIS World, 2011a).

U.S. is the third-largest merchandise goods exporter behind Germany and China, making up approximate 10% of the world total. During last five period, America's position as the largest trading nation has ensured that it is a main contributor to and beneficiary of the higher levels of global trade. For the five years to 2008, total value of trade soared at a robust 6.0% a year to a peak of $3.79 trillion (IBIS World, 2011a). This growth was temporarily reversed in 2009 because of the global economic downturn, which depleted consumer spending both domestically and abroad, causing the value of US trade to plunge by 12.0% (IBIS World, 2011b).

Issues, Concerns, and Ramifications of the Trade on China's Economy

Main concern of the trade balance in China's economy is to address the financing need for its local industry. US trade balance with china amounted -273,063,241,072 dollars, which shows that China's manufacturing is in excess need of financing capital (EWP, 2011). Also, impact of international economic crisis will directly impact the economic growth of the country. China faces several demographic issues that will complicate growth in the ...