TRUMP’S TARIFFS ON CHINA MAY EVEN INCREASE US-CN TRADE DEFIICT
TRUMP’S TARIFFS ON CHINA MAY EVEN INCREASE US-CN TRADE DEFICIT The US has always had a big trade deficit with China. The 10-year chart below shows the wide gap between US Exports to China (Blue line) and US Imports from China (Orange line). The reasons 1. The strong seasonal/cyclical character of US Imports from China which were obtained by decomposing data into trend, seasonal/cyclical and residual components (Orange line in chart below) indicates that these are intermediate goods that are the input for US manufacturing and demand and correlates with their inventory cycles. The US cannot do without such inputs for their manufacturing because Chinese goods are much cheap and of high quality. Chart below shows the strong seasonal/cyclical nature of US imports from China (Orange line). US Imports from China show a seasonality strength of 0.37 versus 0.26 for Exports to China. 2. Frankly, Chinese consumers and manufacturers don’t want US goods...