Tags: Chinas Trade Gap With US Climbs to Record | Fueling Yuan Tension

China's Trade Gap With US Climbs to Record, Fueling Yuan Tension

Friday, 15 Oct 2010 07:17 AM

China’s trade surplus with the U.S. jumped to $28 billion in August, reaching a record for the first time since the financial crisis began two years ago.

The historic imbalance in trade between the nations, while the U.S. economy struggles to add jobs, prompted renewed criticism of China for what federal lawmakers and economists say is an unfair currency policy and illegal barriers to U.S. exports.

The gap “goes a long way to explaining why this economy remains dead in the water despite the massive stimulus,” Alan Tonelson, research fellow at the U.S. Business and Industry Council, a Washington trade group for U.S.-based manufacturers, said in an interview. There is an “ongoing job-destroying leakage of national wealth to China.”

China’s exports to the U.S. climbed to a record $35.3 billion, while U.S. exports dipped to $7.3 billion, according to Commerce Department figures released today. In previous years, China’s U.S. exports increased in August and peaked in October as retailers stocked goods for the holiday shopping season.

“A lot of what we are seeing is a resurgence in retail,” Art Wong, public information officer at the Port of Long Beach, California, said in an interview. “In this period we get all the Christmas stuff.”

Lawmakers have been pressing China to raise the value of its currency, the yuan. Last month the House of Representatives passed a measure that would let American companies seek import duties to counter the effect of a weak yuan. The Senate may take up the measure after the Nov. 2 election.

‘Persistent Thorn’

Senate Finance Committee Chairman Max Baucus, a Montana Democrat, is in Beijing this week, pushing Chinese leaders to cut trade barriers and raise the value of the yuan.

“China’s decision to undervalue its currency has been a persistent thorn in the side of our relationship,” Baucus said in a statement today.

A twice-annual report by the U.S. Treasury Department about whether China manipulates its currency is due tomorrow. The department hasn’t made such a determination since 1994, although Treasury Secretary Timothy F. Geithner has become increasingly vocal in pressing for China to act on its currency.

Groups representing steelmakers Nucor Corp. and U.S. Steel Corp. released a study today detailing support China’s government gives their competitors and urging officials in Washington to curtail investments by Chinese steelmakers in American facilities.

Imports Surge

Overall, international trade subtracted 3.5 percentage points from U.S. growth in April through June, the most since 1947, as imports surged at the fastest pace since 1984.

The U.S. trade deficit grew 8.8 percent to $46.3 billion, an increase that took place even as the dollar’s value dropped, according to the Commerce Department. A weak dollar makes U.S. exports cheaper. The U.S. dollar has weakened 7.2 percent against a trade-weighted basket of currencies since reaching a one-year high on June 7.

Commerce Secretary Gary Locke said the increase in imports is an encouraging sign for the economy.

“While it’s promising that American consumer spending continues to rebound, today’s numbers are another reminder that we still have work to do to help U.S businesses sell more of their goods and services overseas,” Locke said in a statement.

Tonelson said that the data showed the necessity of increasing domestic production and reducing imports and trade groups said it should prod the Obama administration and lawmakers to approve stalled free-trade agreements with Panama, South Korea and Colombia.

“We would be better off” with those agreements, Frank Vargo, vice president for international economic affairs at the National Association of Manufacturers in Washington. “We have more of an export problem than an import problem. We are not the exporter we need to be.”

Vargo added that the trade deficit with China will not see a marked change until China raises the value of the yuan. “Currency is a very big part of it,” he said in an interview.

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China s trade surplus with the U.S. jumped to $28 billion in August, reaching a record for the first time since the financial crisis began two years ago. The historic imbalance in trade between the nations, while the U.S. economy struggles to add jobs, prompted renewed...
Chinas Trade Gap With US Climbs to Record,Fueling Yuan Tension
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2010-17-15
Friday, 15 Oct 2010 07:17 AM
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