The US alone can't end its trade deficit with China, expert says

Key Points
  • The U.S. trade deficit with China was $347 billion last year, nearly double the amount of its next three largest deficits combined.
  • Tariffs and harsh dialogue from the U.S. may not be enough to convince China to change course, one expert said.
Need to up pressure on Chinese to avoid trade war: CSIS' Scott Kennedy

President Donald Trump has been sharply critical of China in regard to trade.

The U.S. deficit with China was $347 billion last year, according to the U.S. Census Bureau. That's nearly double the amount of next three largest U.S. trade deficits combined.

The U.S. will need help from its allies to convince the Chinese to slow production of goods like steel, said Scott Kennedy, deputy director of the Center for Strategic and International Studies' freedom chair in China studies. But so far, he said, the Trump administration has criticized them, too.

"The Trump administration is pushing as hard on Korea, Japan and others that have trade surpluses with the U.S. at the same time as they're pushing on China, and we all need to actually work together to deal with the China problem," Kennedy told CNBC's "Power Lunch" on Wednesday.

Sec. Steven Mnuchin: Must maximize benefit for both US and China

China is the largest exporter in the world, sending most of its goods to the U.S., according to the Observatory of Economic Complexity. The Asian nation has overproduced steel, and the Trump administration is now considering adding tariffs on steel imports from China.

Kennedy said he doesn't think tariffs alone will be enough to persuade China to decrease production.

"They're not in the mood to make major concessions unless they think there's a cost to pay, not just from the U.S., but from others as well," Kennedy said.

Michael Stumo, CEO of the Coalition for a Prosperous America, said Trump needs to fix the deficit because that's what working-class Americans voted for him to do. The overvaluation of the dollar may be hurting, rather than helping, solve the problem, he said.

"We could even pressure our dollar to devalue to equilibrium rate, and that would fix a lot of it, too," he said on "Power Lunch." "But exchange rates have a large part of the global trade imbalance as we see between China and the U.S., Japan and the U.S., Germany and the U.S. etc."