As of 2020, the trade deficit between the United States and China is at $310.8 billion. While that's a notable improvement compared to previous years, it's still a significant deficit.

So, what caused this multi-billion dollar shortage?

The Annual Trade Deficit

Ultimately, deficits occur because of an imbalance between imports and exports. Trade relationships between the US and China are strong. China is among the top five trade partners with the United States. However, the partnership is a tumultuous one.

The United States imports far more from China than it exports. According to United States import statistics from 2020, the US imported roughly $435.5 billion in goods while exporting only $124 billion. If you need United States import statistics data, visit this website.

Factors that Caused the Deficit

Trade with China is complex, but experts agree that the deficit results from two major factors. These include China's low standard of living and the partially fixed value of its currency.

Low Standards of Living

China is the most populated country in the world, with over 1.4 billion residents. However, its gross domestic product per capita is far lower than in the United States. The per-capita GDP is what economists use to measure the standard of living. Currently, China's figure is about a quarter of what it is in the United States.

As a result, everything is cheaper! Labor, goods, and services are more affordable in China. That's why US businesses turn to China for manufacturing and assembling. If products came from onshore facilities, the final price for consumers would be very high.

The low-cost appeal of Chinese manufacturing and assembling has led to a significant rise in imports over the last couple of decades.

China and United States Treasuries

China is one of the largest lenders to the United States. It purchases treasuries to reduce the value of its currency. Why does that matter?

Well, it ensures that the exchange rate stays low with the US dollar. The exchange rate is partially fixed to the dollar, keeping costs down for consumers and cementing China as a cost-effective trade partner.

The trade deficit between the US and China is a hot-button topic in politics today. The United States import statistics show that the figure is going down slowly. However, more changes need to occur to ensure that the United States remains a top economic power.

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