Economics and Trade Bulletin October 10, 2018
U.S.-China Economic and Security Review Commission2
Bilateral Trade
U.S. Monthly Goods Trade Deficit with China Reaches $38.6 Billion in August 2018
In August 2018, the U.S. goods deficit with China hit $38.6 billion, an increase of 10.5 percent year-on-year, and
the highest monthly deficit with China on record. U.S. exports to China were $9.3 billion in August 2018, down
14.9 percent year-on-year, and imports from China reached $47.9 billion, up 4.5 percent year-on-year.1
In the first eight months of 2018, the U.S. goods deficit with China totaled $261.1 billion, up 9.2 percent over the
same period in 2017 (see Figure 1).
Figure 1: U.S. Goods Trade with China, January–August, 2012–2018
Source: U.S. Census Bureau, Trade in Goods with China, October 5, 2018. census.gov/foreign-trade/balance/c5700.html.
The continued growth in U.S. goods imports from China, despite significant tariffs, reflects reports that U.S.
businesses rushed to purchase as many goods from China as possible before tariffs hit.2 U.S. exports to China, on
the other hand, saw a significant decline. Exports of U.S. soybeans, one of the key U.S. exports to China, dropped
to only $24 million in August 2018 down from $455 million in August 2017.3 U.S. soybean growers are heavily
dependent on the China market: In 2017, China accounted for 57 percent of all U.S. soybean exports to the world;
roughly one-third of all soybeans grown in the United States were exported to China by value.4
Bilateral Policy Issues
Latest Round of Tariffs on Chinese Imports Goes into Effect
On September 24, the United States placed a 10 percent tariff on about $200 billion of U.S. imports from China.5
This round of tariffs was implemented shortly after the list of affected products was finalized on September 176 and
incorporated exclusions following six days of hearings in August, where over 350 people had been scheduled to
testify.7 The final list includes 5,745 tariff lines, reduced from 6,031 lines in the original list.8 The Office of the U.S.
Trade Representative (USTR) has stated these tariffs will be raised from 10 to 25 percent in January 2019.9 In
retaliation, China placed a 5 to 10 percent tariff on $60 billion of U.S. exports to China.10
The United States has now put two rounds of tariffs on approximately $250 billion of imports from China, the first
on $50 billion of imports—in two tranches—and the second on $200 billion of imports (see Figure 2).11 For
reference, the United States imported about $505.5 billion of goods from China in 2017.12 With the second round,
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Economics and Trade Bulletin October 10, 2018
U.S.-China Economic and Security Review Commission3
tariffs have begun to impact a wider array of products, including consumer goods. According to Chad Bown, Euijin
Jung, and Zhiyao Lu of the Peterson Institute for International Economics, about 24 percent of goods in the second
round represent consumer-facing products.13
Figure 2: Import Value of Chinese Goods Impacted by Two Rounds of U.S. Tariffs
July 1–October 10, 2018
Source: Created by Commission staff.
Analyzing both U.S. tariff rounds on Chinese products together, intermediate goods—goods consumed by
businesses in the production process—account for more than half of affected imports.14 As seen in Figure 3, $55.5
billion (or 25 percent of affected products)—is classified as machinery and mechanical appliances like engine parts,
air conditioning units, and automated processing machines, and $53.3 billion (24 percent of affected products) is
classified as electrical machinery, equipment, and parts, like static converters, electric conductors, and voice
recognition machines.15 Furniture and motor vehicle parts make up an additional $28.4 billion and $13.7 billion,
respectively (13 percent and 6 percent of affected products).16All remaining product categories comprise no more
than about 4 percent of the total from the two rounds of U.S. tariffs on imports from China.17The largest single
products affected thus far by U.S. tariffs include printed circuit assemblies (a circuit board with electronic
components); switching and routing machines for transmitting voice, image, or other data; processing units; and
metal furniture.18
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Economics and Trade Bulletin October 10, 2018
U.S.-China Economic and Security Review Commission4
Figure 3: Product Categories Covered by First Two Rounds of U.S. Tariffs on Chinese Imports
(2017 trade value)
Note: Peterson Institute for International Economics data on U.S. import value from China in 2017—originally taken from the U.S.
International Trade Commission Dataweb—have been grouped at the HS2 code level.
Source: Created by Commission staff. Data from Chad P. Bown, Euijin Jung, and Zhiyao (Lucy) Lu, “Trump and China Formalize Tariffs
on $260 Billion of Imports and Look ahead to Next Phase,” Peterson Institute for International Economics, September 20, 2018.
https://piie/blogs/trade-investment-policy-watch/trump-and-china-formalize-tariffs-260-billion-imports-and-look.
Bilateral trade negotiations between the United States and China were cancelled as the second round of tariffs went
into effect, which China’s Ministry of Commerce said created “new uncertainty.”19 Lawrence Kudlow, director of
the National Economic Council, has suggested trade negotiations may be resumed at the December meeting of the
Group of 20.20 Potential discussions could be disrupted by a further round of tariffs. The Trump Administration has
stated its intention to implement a third round of tariffs on $267 billion of Chinese imports “if China takes retaliatory
action.”21
Chinese Government Responds to U.S. Tariffs with Reciprocal Tariffs, White
Paper, and Global Tariff Reductions on Other Goods
After the United States imposed tariffs on September 24, China retaliated with new tariffs on $60 billion of U.S.
goods exported to China.22 These tariffs range from 5 to 10 percent and cover 5,207 items.23 The most recent round
of Chinese tariffs primarily impacts intermediate goods (67 percent) and capital equipment (26 percent).24 This
contrasts with China’s first round of tariffs, which targeted U.S. agricultural exports.25 In total, since July 2018
China has imposed new tariffs on approximately $110 billion of goods imported from the United States (see Figure
4).26 For reference, China imported $129.9 billion in goods from the United States in 2017.27。