China Shopping Spree To Defuse Tensions, May Not Ease Trade Gap

By Agence France-Presse China has begun a U.S. shopping spree aimed at defusing tensions over a burgeoning trade gap and the loss of U.S. jobs, but experts say the move is unlikely to have a big impact on the massive U.S. deficit. Deals announced this week call for China to buy billions of dollars' worth of U.S.-made cars from General Motors and Ford, along with 30 Boeing jets worth up to US$1.7 billion. But on Nov.13, the U.S. government said the trade deficit with China widened to a record $12.7 billion in September, topping the previous record of $11.7 billion set in August. China accounted for nearly one-third of the $41.27 billion overall U.S. trade deficit for the month. "I think the [U.S.] administration is putting a lot of pressure on China, and using the protectionist sentiment on Capitol Hill to wring some of these deals with China," said Jay Bryson, an economist at Wachovia Securities. Bryson said China is concerned about efforts in Congress to punish Beijing for what some in Washington consider manipulation of the yuan to make Chinese products more competitive. Some lawmakers are calling for big tariffs on Chinese goods of as much as 27.5%. "I think the Chinese are under a lot of pressure, and that explains the shopping spree," he said. But Bryson and others say the Chinese moves are unlikely to have a major impact on the massive U.S. trade gap. "I wouldn't consider it significant," Bryson said. "The U.S. economy continues to grow faster than the rest of the world, and that means we are going to have a large current account deficit with somebody. In this case, it is with China, because China produces a lot of the low-cost consumer goods that are in demand in the U.S." Copyright Agence France-Presse, 2003