NEW DELHI: Vowing to reduce trade deficit of the US with China, which rose to $375.2 billion last year, President Donald Trump has imposed tariffs on imports of certain Chinese goods. Trump says he is ready to fight a trade war with China. But he may not have the ground to wage such a war because the trade deficit could actually be 10 times less.
A recent report by Deutsche Bank points out that the trade deficit doesn't account for hundreds of billions of dollars in sales made by subsidiaries that the US companies run in China.
"The US business interests in China are much larger than what the trade data shows. The looming trade war puts these interests at risk," said the Deutsche Bank report.
"General Motors, Apple, and other US companies manufactured and sold a combined total of $223 billion in goods through their Chinese branches in 2015. This figure was not factored into Sino-US trade numbers," says China's state-run news outlet Global Times.
"The German bank report also indicated the total revenue earned from US exports to China and revenue earned from its branch sales in China added up to $373 billion, despite Chinese companies achieving $403 billion in the US market. The number means the trade deficit lands at $30 billion, a far cry from the $365.7 billion figure originally claimed by Washington," says an editorial in Global Times.
The editorial says there are several other factors which weigh against China in its trade with the US, and the US tends to ignore these.
"Outside of the subsidiaries factor covered by Deutsch Bank, other factors involved in Sino-US trade relations include the position of China's economy in the middle to lower end of the global value chain. There are a few Japanese and Korean-made products sent to the US included with China's exports, even though they are only assembled in China. Moreover, Washington's calculations on China imports to the US usually include cargo transported from the Chinese Mainland to Hong Kong, and then shipped to the US. But when calculating US exports to China, Washington uses different number crunching methods to calculate export data between the Mainland and Hong Kong. In doing so, Hong Kong finds itself excluded from the total export figures that flow from the US to China," the editorial says.
The Chinese state mouthpiece says that the US is obsessed with its calculation methods and ignores other factors. It says the US deliberately exaggerates the trade deficit figures because it has enough experts and experience in trade to realise the distortion in the trade figures.
"China is, and always will be, confident enough to face any challenge. If the Chinese market became more conservative for US companies, giants like GM and Apple would be affected the most as they highly depend on Chinese subsidies to increase sale," the editorial warns.