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International Monetary Systems and US Trade Deficits with China

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  • Xinquan Tu
  • Kevin H. Zhang

Abstract

Huge trade deficits seem to be a major reason for the current protectionist turn in the United States. Why does the United States run persistent trade deficits for years since 1976? What drives the large U.S.-China trade deficit? This article investigates the issue by analyzing the U.S. trade balance from 1948–2017. Three findings are as follows: (a) the deficit is closely related to the international monetary system started from 1973. Particularly, the persistent deficit since 1976 is an outcome of the U.S. dollar as international money and reserve currency; (b) the size of the U.S. trade deficit increases with the world trade and global economy; (c) countries with large economy and rapid economic growth tend to become the dominant source of the U.S. deficit, like Japan in the 1980s–1990s and China in the new century.

Suggested Citation

  • Xinquan Tu & Kevin H. Zhang, 2019. "International Monetary Systems and US Trade Deficits with China," Chinese Economy, Taylor & Francis Journals, vol. 52(5), pages 377-386, September.
    • Handle: RePEc:mes:chinec:v:52:y:2019:i:5:p:377-386
    DOI: 10.1080/10971475.2019.1617924
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    Cited by:

    1. Sabrine Ferjani & Sami Saafi & Ridha Nouira & Christophe Rault, 2022. "The Impacts of the Dollar-Renminbi Exchange Rate Misalignment on the China-United States Commodity Trade: An Asymmetric Analysis," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 20(3), pages 507-554, September.
    2. Mohsen Bahmani-Oskooee & Huseyin Karamelikli, 2022. "Exchange Rate Volatility and Commodity Trade between U.K. and China: An Asymmetric Analysis," Chinese Economy, Taylor & Francis Journals, vol. 55(1), pages 41-65, January.

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