U.S. Love-Hate Relations With China
President Obama has a date with China’s Vice President Xi Jinping on Valentine’s Day, and despite tensions between the world’s two largest economies, they’re both likely to put on a happy face.
Like it or not, the economic fates of both countries remain closely intertwined.
Second only to Canada, China is America’s next largest trading partner, and the relationship has always been more give, than take. Since communist China opened up its economy in the 1980s, the U.S. has always imported more Chinese goods that it exports to the country.
That imbalance obviously has its pros and cons. As China gained jobs and started to industrialize, America’s manufacturing sector struggled to compete with cheaper wages abroad. Robert Scott, a trade and manufacturing expert at the Economic Policy Institute, estimates the U.S. trade deficit with China cost America 2.8 million jobs between 2001 and 2010 alone.
Despite the job losses though, Americans were quick to welcome China’s cheaper products, and not just on Walmart shelves. Contrary to popular belief, the profits don’t go entirely to China. Research by the San Francisco Fed estimates that for every dollar spent on an item labeled “Made in China,” about 55 cents go to services produced in the United States.
That 55 cents goes to the companies that transport the goods and the U.S. retailers that sell them.