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Why American Firms and Households Need China

Bilateral trade statistics tell only part of the story of the Chinese market’s importance to the US economy. In particular, the availability of cheap imported goods from China lowers prices not only for US consumers, especially low- and middle-income families, but also for US businesses, supporting job creation.

NEW YORK – China will benefit from a normalization of its trade relationship with the United States, but it is important to realize that the same holds true for the US. When the US tech giant Apple recently slashed its sales forecast, CEO Tim Cook pointed to declining sales in China – where US President Donald Trump’s trade war is exacerbating the effects of a slowing economy – as a major contributing factor. Apple’s diminished performance highlights how important the Chinese market has become to the bottom lines of many US companies – and reveals the risks Trump’s protectionism poses to the American economy.

The truth is that Apple sells substantially more iPhones and iPads to the Chinese than US export statistics imply. Likewise, General Motors sells more cars in China than what is recorded in US export data – more, in fact, than in the United States and Canada combined. That is because these companies, like many others, operate in China and sell directly to Chinese consumers. Far fewer Chinese companies sell directly in the US.

Because US companies have increased their operations within China over time, bilateral trade statistics only partly reflect the Chinese market’s importance to the US economy.

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