American companies are doing much more in China than the U.S. trade deficit suggests. It's their greatest weakness. The deficit, the difference between what the United States imports from China and what it exports there, widened to $375 billion last year. It sounds like a lot. U.S. President Donald Trump and others take it as evidence that the relationship between the world's two largest economies is out of whack.
But comparing imports to exports is not a full picture of American commerce with China. A closer look reveals that U.S. firms are in significantly better shape than the deficit suggests — and therefore also are more vulnerable to a trade war.
The huge missing ingredient in the trade deficit number is the business done in China by American companies. General Motors Co. sells more cars in China than at home. There are more Apple Inc. iPhones used in China than in the U.S. Overall, China subsidiaries of U.S. companies sold $223 billion of stuff in 2015, according to research by Deutsche Bank AG.