Yukon Huang on the U.S. Trade Deficit with China

A positive relationship between the United States and China, the world’s two largest economies, is crucial for promoting global growth and development. The bilateral relationship, however, has become increasingly fraught by disagreements over what a “fair” economic relationship entails. In this podcast, Paul Haenle sat down with Carnegie Senior Fellow Yukon Huang to discuss major issues in U.S.-China economic relations. Yukon explained that many Americans incorrectly attribute the United States’ large trade deficit with China to bilateral issues, when trade is inherently a multilateral dynamic. Yukon noted other factors which drive the U.S. trade deficit with China, such as the diverging average savings rate per household in the two countries. In the coming years, Yukon predicted U.S. companies will continue to advocate for China to loosen restrictive investment barriers, especially in the service sector. While China recently indicated it is willing to further open up industries to foreign investment, it remains unclear when these changes will go into effect. Yukon argued that as China continues to develop, regional trade agreements like the former Trans-Pacific Partnership will help apply outside pressure for China to implement domestic reforms. In his view, a regional trade agreement is in in the interest of all parties.