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Fact check: Is Trump right that the U.S. loses $500 billion in trade to China?

Trump to raise tariffs on Chinese goods
  • President Trump complained via Twitter that the U.S. is losing $500 billion a year in trade to China.
  • Our rising trade deficit with China stood at $419 billion in 2018, up from t $375 billion in 2017 and $347 billion in 2016. 
  • The deficit, which refers to the gap between imports and exports, is growing because the strong U.S. economy is creating demand for Chinese imports.

President Donald Trump is airing his trade grievances against China, tweeting on Monday morning that "we lose 500 Billion Dollars" a year in trade with China. The tweet came after Mr. Trump threatened to boost tariffs on Chinese goods, signaling his displeasure with the progress of trade talks between the two countries.

"The United States has been losing, for many years, 600 to 800 Billion Dollars a year on Trade. With China we lose 500 Billion Dollars," he tweeted. "Sorry, we're not going to be doing that anymore!"

Trump tweet

However, the size of the trade deficit with China isn't as large as Mr. Trump portrayed in his tweet. And it's not as if the U.S. is "losing" actual dollars in its trade deficit with China, or any other country, for that matter. The trade deficit refers to the gap between the value of imports and exports, and economists note that they aren't considered inherently "bad" or "good."

The trade deficit between China and the U.S. stood at $419 billion in 2018, or $81 billion less than Mr. Trump portrayed in his tweet, according to Census figures. It's possible that Mr. Trump was considering total exports from China last year, which reached $539 billion. But when tallied with U.S. exports to China -- about $120 billion -- the total trade gap wasn't quite as large as Mr. Trump portrayed. 

Despite Mr. Trump's hard-line position on trade, the trade deficit with China has grown under his administration, Census figures show. The deficit stood at $375 billion in 2017 and $347 billion in 2016.

The reason? A strong American economy encourages consumers to spend rather than save, sparking demand for imported goods and services. Economists say the growing U.S. economy -- which Mr. Trump likes to take credit for -- is leading to higher trade deficits with China. 

Bigger trade deficits

Global trade deficits are likely to reach an all-time high in 2019, Oxford Economics predicted in a March research note, citing "healthy" demand from U.S. consumers and a strong U.S. dollar. The Trump administration is seeking to wring commitments from China to purchase more U.S. goods, but the broader trends may be tough to overcome, economists say.

"Despite the significant elevation in U.S.-China trade tensions, last year was still a record for overall trade volumes between the two economic giants," Jake McRobie, U.S. economist at Oxford Economics, wrote in March. "We still see the fundamental forces continuing to widen the U.S. trade deficit with China in 2019."