Trade in goods between the US and China climbed to a record in 2022, a reminder that consumers and companies in the world’s two biggest economies remain deeply connected while their governments diverge on a range of economic and political issues.

Total merchandise trade between the two countries rose to $690.6 billion last year, exceeding the record set in 2018, Commerce Department data showed Tuesday. The data are not adjusted for inflation.  

The annual goods-trade deficit with China widened 8% to $382.9 billion, the biggest on record after the $419.4 billion shortfall in 2018. 

The deepening trade ties between the countries risk being challenged by the widening split between Washington and Beijing, which have clashed on issue including human rights, trade and competition for technology and markets. The data also come at a particularly low point between the two amid the shooting down this week of an alleged Chinese spy balloon over US territory.

Washington is pressing ahead with plans to curb China’s access to sensitive semiconductor technology and is trying to get countries it considers allies to do the same. 

It’s also working to lessen US reliance on China for merchandise, encouraging Western companies to invest in what Treasury Secretary Janet Yellen has termed “trusted trading partners” such as India in a process known as friendshoring. 

The value of merchandise exports to China climbed to an all-time high of $153.8 billion, while imports increased to $536.8 billion, just under the record set in 2018. 

“It shows that consumers have minds of their own,” said William Reinsch, who served as a top Commerce official in the Clinton administration and is now a senior adviser at the Center for Strategic and International Studies, a Washington-based think tank. “At the market level, we’re still doing a lot of business, despite the efforts of both governments. The macro relationship hasn’t changed that much; we’re still trading a lot.”

Tariff Strategy

The Biden administration has kept in place a set of tariffs imposed under President Donald Trump and confronted Beijing over what it sees as human-rights abuses, unfair trade practices and threats to US national security. 

But hundreds of US businesses big and small have made a fresh push for the removal of the levies — which were instituted in waves starting in 2018 — saying they have raised their input costs at a time of accelerating inflation. 

As the White House reviews the tariffs, there’s little indication that the White House is inclined to significantly roll back the tariffs on the imports that span industrial inputs — such as microchips and chemicals — to consumer merchandise, keeping them in place as leverage against China and amid concerns that repealing them would be politically risky.

Chips Flashpoint

The chip industry continues to be a major flashpoint for trade tensions. 

Though China is the biggest maker of phones and computers, US companies still control most of the underlying chip technology, and it tightened restrictions on exports of semiconductors last year. Beijing in December filed a dispute with the World Trade Organization trying to overturn US-imposed export controls, which aim to limit the Asian nation’s ability to develop a domestic semiconductor industry and equip its military.

Officials on both sides are looking at ways better manage the differences between the two powers, with Yellen and Vice Premier Liu He holding in-person meetings in Zurich in January. That followed face-to-face discussions held by Presidents Joe Biden and Xi Jinping held in Bali, Indonesia, in November. 

But the efforts to thaw relations took a knock after the Pentagon detected a suspected Chinese surveillance balloon lingering at high altitude over sensitive nuclear sites in Montana, which led to the postponement of a visit by Secretary of State Antony Blinken. 

Trading Partners

China maintained its third place among the top US trading partners for goods in 2022, accounting for 13% of total trade. Canada kept the top spot with a 14.9% share valued at $793.8 billion, while Mexico was second at 14.7%, or $779.3 billion. 

The only change in the top-10 rankings relative to 2021 was Vietnam, which rose two spots to 8th position, with total trade of $138.9 billion.