International trade is based on mutual cooperation grounded in resource endowments, international division of labor, and comparative advantages of countries, rather than a zero-sum game. The China-US economic and trade relationship is a joint product of economic globalization and Asia-Pacific regional economic cooperation.

For a long time, some in the United States have focused on the China-US goods trade deficit, attempting to address the so-called "trade imbalance" by imposing tariffs and restricting investment. However, facts show that the US trade deficit with China is not caused by China, but is an inevitable result of the hollowing out of its own manufacturing and structural economic issues. Equating the goods trade deficit with "losing out" is a misunderstanding of basic economic principles and an excuse to force a trade war.

Over the past decades, the US goods trade deficit has continuously expanded, mainly due to the following three factors—

Low savings rate and high consumption tendency. The US personal savings rate has long been low, only 3.8% in December 2024, while consumption expenditure accounts for about 70% of GDP. This "living beyond one's means" consumption pattern causes US demand for goods to far exceed its domestic production capacity, making the goods trade deficit a norm. Even if imports from China are reduced, the US still needs to import goods from other countries to meet domestic consumption gaps.

Hollowing out of manufacturing and industrial relocation. For decades, US companies have shifted manufacturing overseas for economic benefits, which has objectively led to the manufacturing sector's share of US GDP dropping from about 25% in 1960 to about 10% currently, and manufacturing employment falling from nearly 20 million at its peak in 1979 to just over 12 million now, accounting for about 8% of total employment.

The international monetary status of the US dollar. As the issuer of the world's main reserve currency, the US provides global international capital liquidity and foreign exchange reserve assets through its current account deficit, leading to an overvaluation of the dollar and the long-term existence of the US trade deficit. In other words, the US needs to maintain a trade deficit with other countries to sustain the dollar's dominant position in the international monetary and financial systems.

Viewing the goods trade deficit as "losing out" is a misleading zero-sum mindset. International trade is based on mutual cooperation grounded in resource endowments, international division of labor, and comparative advantages of countries, not a win-lose game. Evaluating economic and trade relations and benefits between countries should not only consider the amount of goods trade and surplus scale but also commercial profits and overall gains. In China-US economic and trade exchanges, although China has a goods trade surplus with the US, many key components still need to be imported from the US and other developed countries. Meanwhile, China purchases a large amount of US services, including intellectual property payments, financial insurance, logistics, and professional services. The added value and profit margin of Chinese manufacturing are relatively limited. In contrast, US exports to China have high added value and profit levels. US companies earn far more profits annually from investments in the Chinese market than Chinese companies do in the US market. The US leads in high value-added service sectors, with annual income from intellectual property usage fees exceeding $144 billion, far surpassing other countries, especially maintaining a huge service trade surplus with China. To assert that the US "loses out" solely based on the goods trade deficit is completely one-sided.

Imposing tariffs by the US does not help solve the trade deficit but instead harms and backfires on its own economy. Due to the lack of a complete and efficient industrial chain and sufficient skilled labor, the US cannot attract manufacturing back in the short term. Meanwhile, tariffs significantly increase US import costs, burden enterprises, raise inflation levels, and strengthen inflation expectations. Ultimately, tariff costs are mainly borne by US importers and consumers. Yale University's Budget Lab predicts that a broad 20% tariff would cost the average US household up to $4,200 annually.

To address issues like manufacturing hollowing out and wealth distribution imbalance, the US needs to focus on internal reforms such as education system reform, enhancing manufacturing core competitiveness, infrastructure construction, and workforce skill upgrades, rather than blaming other countries. China has no intention to challenge the US and has never initiated trade disputes, always advocating that China and the US resolve differences through equal dialogue and consultation. China is firmly committed to expanding openness and building a high-level, institutionalized pattern of opening up, but the US repeatedly sets obstacles, restricts two-way investment with China, limits technology exports to China, and undermines international trade rules through tariff policies. Its motives are clearly not just to solve the trade deficit but to contain China's industrial upgrading and technological progress.

The China-US economic and trade relationship is a joint product of economic globalization and Asia-Pacific regional economic cooperation. Strengthening dialogue and cooperation between China and the US is the only way to continuously advance sustainable production, sustainable trade, and sustainable consumption, injecting more certainty and stability into the world economy.

(The author is the Deputy Director of the Academic Committee of the Institute of International Trade and Economic Cooperation, Ministry of Commerce)

Source: People's Daily