As China’s trade surplus increases, the U.S. economy slows down. “Buy U.S. products”, say analysts in a hope that this will reduce U.S. dependence on China. But in fact, everything bought in China goes back to the U.S. pockets, writes Financial Times.
If you buy a pair of shoes for $70, much of the sum is actually the cost of rent, storage, advertising and shipping of the shoes, not the product itself, says the Financial Times, citing a study of EDF, presented by Business Insider.
In addition, according to EDF calculations, about 88% of consumer spending represents services, and only 2.7% is the cost of products made in China. Moreover, if you take out the transportation, the percentage drops to 1.2%.
So, on average, for every dollar spent on a product labeled “made in China”, 55 cents goes back to the U.S. local services. In addition, because T-shirts, shoes, DVDs and TVs imported from China are cheaper, they contribute more than those made in Germany or Japan.
And inflation has a word to say in this equation. If Chinese goods represent only 2.7% of the population expenses, it is hard to believe that a resident of Ohio, for example, will feel the increasing of labor costs at a factory in Guangdong.
China’s exports
In July, thanks to record export numbers, China reported a strong growth of the trade surplus of $31.48 billion, according to AFP.
In addition, China’s trade surplus with the United States increased by 7% to $20.9 billion, while the gap with the EU, its largest trade partner, rose by 28% to $17.8 billion dollars, according to Yahoo News. What does this mean? Chinese exports have defied international economic shocks, despite the fact that analysts were expecting the markets to be affected by the crisis, and the European or U.S. markets to reduce their buying power.
In addition, China is under pressure. Officials in Washington insist that Beijing should lessen its control over the yuan-dollar exchange rate, which keeps the trade surplus high.