US-China trade deficit shrinks by 25% to $279 billion

The US and China trade deficit in goods has substantially decreased, hitting its lowest since 2010. According to Stocklytics.com, the US-China trade deficit reduced by 25% to $279 billion in 2023.

Edith Reads, a financial expert at Stocklytics, said, “There has been a notable shift towards regionalization and diversification of supply chains, with many companies seeking to reduce their dependence on any single country.

“This diversification has led to a more balanced trade relationship between the US and China.”

The trade deficit between the US and China has risen for the past few years. In 2020, it was $310 billion. In the following year, as COVID-19 slowed down, it was $355.3 billion, a substantial 14.5% increase.

The trend didn’t change in 2022 as the US goods and services trade deficit with China marked an 8.3% increase to $367.4 billion. However, 2023 departed from the previous trends with a significant 25% decrease.

Several factors led to this decline, among them adjustments in trade policies between the two countries. These policies, touching on tariffs and trade agreements, saw both countries seek the best alternatives in supply chains.

Shifts in consumer preferences also played a role in rebalancing trade flows. As a lesson from COVID-19, The US has been attempting to reduce dependence on Chinese manufacturers to overcome supply chain issues. The country was hit with a shortage of supplies as COVID-19 ravaged China. This approach has seen the US turn to other alternatives in Latin America, Southeast Asia, and domestic manufacturing.

The world is tense due to geopolitical conflicts such as human rights abuses, intellectual property, and territorial disputes. Some of these disputes often serve as direct points of conflict between nations, further complicating their trade relationship.

Besides, continued political and regulatory scrutiny has forced some US companies to rethink their engagements with China. As a result, supply chains and trade partnerships have been affected.

In addition, the Biden administration’s approach to trade policy has emphasized multilateralism and collaboration with allies to address shared concerns regarding China’s trade practices.