China’s Truce With U.S. Exposes Rest of the World

Washington and Beijing are reaching a limited truce in the trade war. President Donald Trump gave the large bilateral trade deficit as a primary reason for challenging China over its practices and access to its markets. He can be happy: The Chinese surplus with the U.S. was down nearly 20%, or $50 billion, in 2019 from 2018. Beyond the phase one deal, this reduction and its knock-on effects have the potential to remake global economic relations.

For the world’s largest economy, a trade deficit with a single country is borderline irrelevant. What matters is the total balance. When China became a member of the World Trade Organization in 2001, the global U.S. deficit was more widely dispersed among countries ranging from Mexico to South Korea. Though it never stopped growing, over time the deficit became much more concentrated. According to the U.S. Census Bureau, the Chinese share grew to 48% in 2018, climbing from 19% in 2000 and 10% in 1990.