China's Trade Gap With U.S. Climbs to Record, Fueling Yuan Tension
Oct. 15 (Bloomberg) -- Gene Ma, managing director at International Strategy & Investment Group in Washington, talks about U.S.-China trade and the outlook for the appreciation of the yuan. 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 prompted renewed criticism of China for what federal lawmakers and economists say is an unfair currency policy and illegal barriers to U.S. exports. A twice-annual report by the U.S. Treasury Department about whether China manipulates its currency is due later today. Ma spoke with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
Oct. 15 (Bloomberg) -- Rebecca Patterson, global head of foreign exchange at the private banking unit of JPMorgan Chase & Co. in New York, talks about the outlook for global currencies. The dollar rose for the first time in four days versus the euro as falling global stocks and growing U.S. legal scrutiny of home foreclosure practices boosted demand for the greenback as a refuge. Patterson also discusses international ire over currency valuations. She speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
China ran up a record $28 billion trade surplus with the U.S. in August, bolstering complaints from American business groups and lawmakers that a weak Chinese currency gives exports an unfair advantage.
“China’s decision to undervalue its currency has been a persistent thorn in the side of our relationship,” Senate Finance Committee Chairman Max Baucus, a Montana Democrat, said in a statement after meeting with Chinese officials in Beijing yesterday.
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 yesterday. It’s the first record-setting trade gap since the financial crisis hit in 2008. A weak currency makes a country’s exports cheaper.
In previous years, China’s exports to the U.S. 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.”
U.S. 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’
A twice-annual report by the U.S. Treasury Department about whether China manipulates its currency is due later today. Under Presidents George W. Bush and Barack Obama, the department has resisted calls from Congress to make such a determination. In recent weeks, Treasury Secretary Timothy F. Geithner has become increasingly vocal in pressing for China to act on its currency.
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.
The gap with China is the largest, and “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.
Commerce Secretary Gary Locke said the increase in imports is an encouraging sign for the economy.
‘Work to Do’
“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 yesterday.
Tonelson said the data showed the necessity of increasing domestic production and reducing imports. 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, said. “We have more of an export problem than an import problem. We are not the exporter we need to be.”
Vargo said the trade deficit with China won’t 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.
To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net
To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net Company news:
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