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The hidden trade surplus of the United States

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The United States has a surplus of 20 billion USD with China and 1.4 trillion USD with the rest of the world, which is the aggregate sales account, which measures both direct trade and sales of international companies. The data was released by new report of Deutsche Bank.

The direct trade balance of the US in 2017 records an annual deficit of over 330 billion USD with China and about 550 billion USD with the rest of the world. However, looking at the deficit in goods and services is misleading because it does not catch the true size of American business interests. The commercial and corporate information is usually not merged. So if we add sales data to US companies abroad and foreign companies in the United States, it turns out that “US companies have sold more to the rest of the world than any other country has sold in the US over the past 10 years”, says the report of Deutsche Bank.

The position of the US President Donald Trump offended the rest of the developed world. At the same time, Washington and Beijing are negotiating to avoid a trade war.

For China, the claim of a huge trade surplus with the US “does not correspond to the fact that Chinese consumers have more iPhone and buy more General Motors cars than Americans”. The key is that “these cars and phones are sold to China not through US exports but through their Chinese subsidiaries”, explain the economists.

Thus, instead of a growing trade deficit with China, Deutsche Bank estimates that the US has a small but growing surplus. It is driven by the rising demand of Chinese households for foreign goods and services, thanks to the rising wealth. By 2022, this surplus could expand to over 100 billion USD if the two largest economies avoid the trade war.

In 2017, by this method, the United States has a surplus in trade with Mexico and Canada, but also a small deficit with Japan and Germany.

But not all are convinced that it is useful. The recent US Treasury officer, Brad Setser, says Deutsche Bank compares apples with oranges.

“Considering total sales creates more problems than it solves”, said he. But he points out that the data is important because it shows clearly that the interests of US companies do not always match those of the workers as companies benefit from expanding abroad without exporting from the US and hiring workers there.