The total value of U.S. trade in January was up year-on-year. Still, according to the latest U.S. foreign trade data, the trade deficit in goods between the United States and China was down by $900 million month-on-month in January. The United States is China’s top trade surplus country, and lower exports to the United States will weigh on China’s economy.
The United States was one of the few countries to see month-on-month and year-over-year increases in imports and exports in January 2023. Its exports rose 3.4 percent in January to $257.5 billion, while imports rose 3.0 percent to $325.8 billion, according to the Department of Commerce’s news release on March 8. U.S. exports rose 13.3 percent in January 2023 from a year earlier, while imports rose 3.5 percent from a year earlier. The figures are seasonally adjusted.
The total U.S. trade deficit, which includes goods and services, grew 1.6 percent month-on-month to $68.3 billion in January, but the deficit with China is shrinking.
Trade between the United States and China consists of both goods and services. The United States has always had a surplus in services (i.e., exports exceed imports) but a deficit in goods—a surplus with China—an important source for the Chinese Communist Party (CCP) to earn U.S. dollars.
The U.S. trade deficit with China in January was $21.9 billion, down $900 million, or 3.9 percent, from $22.8 billion in December 2022.
Quarterly data (pdf) shows the full-year trajectory of the U.S.-China trade deficit in goods through 2022. In the fourth quarter of 2022, U.S. exports to China increased by $1.7 billion, while imports from China fell by $28.5 billion, leaving a trade deficit of $68.2 billion, according to the March 8 report.
The U.S. -China trade deficit in goods for the first three quarters of 2022 was $115.1 billion, $102.4 billion, and $97.1 billion, respectively, showing that the trade deficit has narrowed for the year. The trade deficit for the fourth quarter fell by 28.9 billion dollars, more than the previous two quarters ($12.7 billion and $5.3 billion) combined.
The Department of Commerce only provides statistics on trade in goods and services by country and region on a quarterly basis, with a one-month lag.
According to CCP official data, the value of China’s exports fell 6.8 percent from a year earlier to $506.3 billion in the January-February period; imports totaled $389.4 billion, down 10.2 percent year on year. China’s exports to the United States have been falling year-on-year (pdf) since August 2022, and this decline has gradually accelerated. In January and February, China’s exports to the United States fell 21.8 percent year on year, while imports from the United States fell 5.9 percent.
According to CCP official data, in 2022, China’s trade surplus totaled $877.60 billion. The trade surplus with the United States was $404.138 billion, accounting for 46.1 percent. The total value of China’s trade surplus from January to February of 2023 was $116.89 billion, of which the trade surplus with the United States was $41.292 billion, accounting for 35.3 percent. After the 2023 new year, the proportion of China’s trade surplus with the United States in China’s overall trade surplus declined by more than 10 percent.
The United States is China’s largest export destination, and a sharp drop in exports to the United States is bound to affect China’s export earnings and economic recovery in 2023.
Since the statistics bureau can only collect data after the goods go through customs, the export data has lagged in reflecting the trade orders. The foreign trade data from January to February is similar to the foreign trade orders from three months ago.
China’s export figures for the first half of 2023 have not looked good as orders have fallen and some companies have had to give some workers long vacations.
For example, some employees of Dongguan Chitwing Technology Co., Ltd. (002855.SZ) have been given a three-month holiday (from Feb. 21 to May 20). The holiday notice says, “… due to the impact of the overall situation, the company’s order volume has dropped sharply.” Dongguan Chitwing Technology’s customers include OPPO, Huaqin, Samsung, Huawei, Google, and Facebook.
The Bank of China (BOC) Research Institute released a “Macroeconomic Outlook” report (pdf) on Feb. 28 that discusses the reasons for the sharp decline in exports to the United States and the likely future trend.
“In the second half of 2022, the decline in export growth to the United States was the earliest and deepest, and had the biggest impact on China’s export growth,” the report said.
The reasons for the sharp decline in China’s exports to the United States, analyzed in the report, include the early release of consumer demand in the United States, the high inventory of goods and the need to destock in the States, and the shift of the U.S. supply chain to other countries.
However, U.S. imports rose in January both month on month and year on year, so the impact of U.S. supply chain shifts is likely to be more significant for the three reasons cited in the BOC Research Institute report.