By Jeffry Bartash, MarketWatch
The simmering trade war between the U.S. and China has led both sides to raise tariffs, but the lopsided trade relationship between the two countries means the impact will fall heaviest on Chinese producers and American consumers and farmers.
The U.S. imported a record $539.5 billion in goods from China in 2018. The U.S. is a net importer from China in most market segments such as consumer electronics, apparel, furniture and industrial supplies. The one major exception: agriculture.
By contrast, the U.S. shipped a much smaller $120.3 billion in goods to China last year, Census trade figures showed.
Exports to China fell from almost $130 billion in 2017 as buyers shunned American soy and corn. U.S. farm exports to China fell to $5.9 billion in 2018 from $15.9 billion in the prior year.
President Trump has raised or in the process of hiking tariffs on virtually all goods imported from China because talks to resolve disputes over fairer trading rules have faltered. Yet the president will meet with the Chinese leader, Xi Jinping, this week and press reports suggest a temporary truce might be declared.
The flareup rattled Wall Street last month, but stocks have since rebounded. The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.89% and S&P 500 /zigman2/quotes/210599714/realtime SPX +1.00% are both near record highs.
U.S. tariffs on $200 billion in Chinese imports were recently increased to 25% from 10%.
Trump also said the U.S. would begin the process of applying the 25% tariff to another $325 billion in imports that have been left alone so far. It could take several months or longer to put them into effect, though, and that’s given the two countries more time to negotiate.
Households and companies could pay more for a variety of consumer staples or business supplies. The U.S. imports thousands of products from China ranging from TVs and cell phones to clothing and handbags to industrial chemicals and rare metals.
The U.S. has run large deficits with China for years and in some cases no longer produces certain goods such as consumer electronics that are popular with Americans. It won’t be easy, and it might even be impossible, to reduce the gap much any time soon.
The U.S. is expected to maintain a large surplus with China in services, which totaled $40.5 billion in 2018. The surplus largely reflects spending by Chinese tourists and exchange students.
So far the trade dispute has hurt China more than the U.S. Yet economists, business leaders and investors worry that a long-lasting standoff between the two largest economies in the world could result in lasting damage to the global economy if it metastasizes.