Economics and Trade Bulletin July 9, 2018
U.S.-China Economic and Security Review Commission2
Bilateral Trade
U.S. Deficit with China Reaches $33.2 Billion in May 2018
The U.S. trade deficit in goods with China totaled $33.2 billion in May 2018, its highest monthly level since January
and a 4 percent increase year-on-year (see Figure 1). U.S. exports to China grew 7.6 percent year-on-year to $10.6
billion, while U.S. imports from China increased 4.8 percent year-on-year to $43.8 billion.1 In the first five months
of 2018, U.S. exports to China were $52.9 billion, a 7.8 percent increase year-on-year, and imports from China
reached $205.1 billion, up 9.4 percent year-on-year.2 The year-to-date, U.S. deficit with China totaled $152.2
billion, an increase of 9.9 percent from 2017.3
Figure 1: U.S. Exports, Imports, and the Trade Deficit with China, January 2017–May 2018
Source: U.S. Census Bureau, Trade in Goods with China, August 4, 2017. census.gov/foreign-trade/balance/c5700.html.
On July 2, China’s General Administration of Customs released an unexpected statement describing exports to the
United States in the first six months of 2018.4 According to the statement, exports to the United States grew only
5.4 percent year-on-year during that period, a significant decline from the same period in 2017.5 Some analysts
questioned the data’s reliability, noting, in particular, that taking into account the renminbi’s (RMB) exchange rate
against the U.S. dollar, China’s exports to the United States should have sustained double-digit growth rates.6
Analysts also noted that the timing of the release (on the eve of U.S. tariffs on Chinese products going into effect)
was suspicious, and likely aimed at deescalating the tensions over the size of the U.S. deficit with China.7
Bilateral Policy Issues
U.S. Tariffs Imposed and Released in June
On July 6, 2018, the U.S. government began collecting 25 percent duties on $34 billion worth of imports from
China, triggering an equivalent response from China. The tariffs are the first tangible outcome of the Trump
Administration’s Section 301 investigation into China’s policies and practices on intellectual property (IP) and
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30%
JanFebMarAprMayJunJulAugSepOctNovDecJanFebMarAprMay
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Economics and Trade Bulletin July 9, 2018
U.S.-China Economic and Security Review Commission3
technology transfer.* On June 15, the Office of the U.S. Trade Representative (USTR) published two lists of imports
from China (List 1 products, which already passed through a public comment period, and List 2 products, containing
newly proposed tariff lines) on which Section 301-related 25 percent tariffs will be imposed. Together with exports
from several other countries, Chinese exports are also subject to a separate set of tariffs stemming from Section 232
investigation into the impact on U.S. national security from imports steel and aluminum, which went into effect on
June 1. These actions are summarized in Table 1 below.
Table 1: Summary of June 2018 U.S. Trade Actions
Action ProductMeasure
Tariff
RateEst. Value
Date in
Effect Countries of Origin
Section
232 Steel Tariff 25%
over $23
billion 6/1/2018
All countries of origin,
except Australia,
Argentina, Brazil, and
South Korea
Quota $5.5 billion 6/1/2018
Argentina, Brazil, and
South Korea
Section
232 Aluminum Tariff 10% $17 billion 6/1/2018
All countries of origin,
except Australia and
Argentina
Quota $0.5 billion 6/1/2018
Argentina
Section
301
USTR List 1 Tariff 25%
$32–$34
billion 7/6/2018 China
USTR List 2 Tariff 25%
$14–$16
billion TBD China
Note: Section 232 import value estimates derive from Congressional Research Service country of origin estimates using 2017 data.
Source: Various.8
Section 232 tariffs: On June 1, U.S. Customs and Border Protection announced the addition of Section 232
tariffs on steel and aluminum products.9 Tariffs on steel apply to all countries of origin except Australia,
Argentina, Brazil, and South Korea; Argentina, Brazil, and South Korea are covered by an absolute quota.10
Similarly, tariffs on aluminum apply to all countries of origin except Australia and Argentina; Argentina is
covered by an absolute quota.11 The Congressional Research Service (CRS) estimated the total import value
of steel products at issue at about $29 billion and aluminum products at issue at about $17 billion in 2017.12
Section 301 List 1 tariffs imposed July 6: List 1 represents a revised product list culled from the original
list of proposed tariff lines published on April 6 by the USTR.13 Compiled by several government agencies,
the list identified imports that benefit from Chinese industrial policies as described by the USTR’s Section
301 investigation into China’s technology policies and practices.14 Of the original 1,333 tariff lines, 818
remain following public comment, during which approximately 3,200 written submissions were received
and 121 witnesses testified.15 These products’ import value is estimated between $32 and $34 billion. 16
* For more information on the USTR Section 301 investigation, see U.S.-China Economic and Security Review Commission, Economics
and Trade Bulletin, April 2018, 2–4. uscc.gov/sites/default/files/trade_bulletins/2018%20May%20Trade%20Bulletin.pdf.
For more information regarding the U.S. Department of Commerce’s Section 232 investigations into steel and aluminum, see U.S.-China
Economic and Security Review Commission, Economics and Trade Bulletin, March 2018, 2–5.
uscc.gov/sites/default/files/trade_bulletins/2018%20May%20Trade%20Bulletin.pdf.
The $2 billion difference likely reflects the year in which import value was estimated. The USTR calculated the value of proposed tariff
lines based on 2018 trade values and found List 1 tariff lines to cover $34 billion in U.S. imports from China. At PIIE, Chad Bown, Euijin
Jung, and Zhiyao Lu found that List 1 tariff lines cover an estimated $32 billion in U.S. imports based on 2017 trade data from the USITC.
Economics and Trade Bulletin July 9, 2018
U.S.-China Economic and Security Review Commission4
According to U.S. International Trade Commission (USITC) import data pulled by researchers at the
Peterson Institute of International Economics (PIIE), about half of List 1 products’ 2017 U.S. import value
came from the top 36 products, including LEDs, airplane and printer parts, radio navigation aids, pumps,
flat panel displays, and refrigeration equipment.17 Customs and Border Protection began to enforce the 25
percent tariff on List 1 product categories on July 6.18
Section 301 List 2 tariffs in public comment period: List 2 represents a new product list covering 284 tariff
lines (valued at an estimated $14–$16 billion) compiled by the Interagency Section 301 Committee.19
According to USITC import data pulled by PIIE researchers, about half of List 2 products’ 2017 U.S. import
value came from the top 11 products, including integrated circuits and semiconductor inputs.20 List 2 will
be subject to a public comment period—including a hearing on July 24—before coming into force.21
Proponents of the tariffs argue that stronger trade enforcement actions against China like “tariffs, investment
restrictions, and a WTO [World Trade Organization] case” might help stop IP theft and unfair practices.22 American
Federation of Labor and Congress of Industrial Organizations (AFL-CIO) Trade and Globalization Policy Specialist
Celeste Drake commented that “we think these tariffs are a good start, if used strategically.”23 Georgetown Law
Professor Owen E. Herrnstadt concurred: “The Trump Administration’s report on 301 and its initial