Congressional Research Service, What’s the Difference? Comparing U.S. and China Trade Data, April 23, 2018

Summary

The size of the U.S. bilateral trade deficit with China has been and continues to be an important issue in bilateral trade relations. President Trump and some Members of Congress view the deficit as a sign of unfair economic policies in China. The Trump Administration has reportedly asked China to develop a plan to reduce the bilateral trade deficit by $100 billion. Legislation has been introduced in the 115th Congress, including the Balanced Trade Act of 2017 (H.R. 2766) and the Trade Enforcement and Trade Deficit Reduction Act (H.R. 2734), that would require the Trump Administration to take steps to reduce substantial bilateral trade deficits.

There is a large and growing difference between the official trade statistics released by the United States and the People’s Republic of China. According to the United States, the 2017 bilateral merchandise trade deficit with China was $375.3 billion. According to China, its trade surplus with the United States was $275.8 billion—a $99.5 billion difference.

This report examines the differences in the trade data from the two nations in two ways. First, it compares the trade figures using the Harmonized Commodity Description and Coding System (Harmonized System) to discern any patterns in the discrepancies between the U.S. and Chinese data. This comparison reveals that nearly 90% of the difference in the value of China’s exports to the United States in 2016 was attributable to five types of goods. Those five types of goods, in order of the size of the discrepancy, were electrical machinery, machinery, toys and sporting goods, footwear, and optical and medical equipment.

The second approach to examining the differing trade data involves a review of the existing literature on the technical and non-technical sources of the trade data discrepancies. The literature reveals that the leading sources of the discrepancies are differences in the list value of shipments when they leave China and when they enter the United States, and differing attributions of origin and destination of Chinese exports that are transshipped through a third location (such as Hong Kong) before arriving in the United States.

In light of the differences in the official bilateral merchandise trade data, the U.S.-China Joint Commission on Commerce and Trade (JCCT) established a statistical working group in 2004. The working group has released two reconciliation studies (in 2009 and 2012) to identify the causes of the statistical discrepancies. The Working Group stated that the adjustments contained in the two studies are not meant to imply errors in the official statistics of either country.

This report is updated annually, after the release of official trade data by China and the United States.