Citi Sees China Struggling to Fill Shopping Cart With U.S. Goods

(Bloomberg) -- The U.S. lacks the capacity to sell $1.2 trillion more goods to China as part of any trade deal without diverting exports away from other countries and investing in new production, according to Citigroup Inc.

China has offered to make the additional purchases over six years and thereby help reduce the U.S. trade deficit. However, analysis of the International Trade Centre's Export Potential Map shows America's ability to quickly boost sales to the Asian nation is limited to selected products “without major adjustments and disruptions,” Citigroup economists Dana Peterson and Catherine Mann wrote in a March 6 report.

“The U.S. likely can increase supplies of soy products to China in the short run, as well as select meats,” they said. “However, meeting the proposed $1.2 trillion of additional shipments of goods to China over six years, including energy, machinery and tech products, will require major adjustments in the U.S. and China's current trading partners, as well as a reconfiguration of U.S. domestic production of these items.”

Based on untapped potential export capacity, the U.S. could theoretically ship about $57 billion of additional goods to the Asian nation, including $19 billion of soybeans as well as some meats, according to Citigroup's analysis of the ITC data. America would need to export less to other partners to bolster flows of other products that China wants, including cars, aircraft and computer chips.

It could potentially redirect $4 billion worth of shipments of large aircraft to China, $4.6 billion in tech components and $7.3 billion in passenger cars, according to the report. This could mean fewer goods to some of its primary export markets including the European Union, Canada and Mexico and smaller Asian economies such as Japan, ASEAN countries, India and South Korea.

Click here for an analysis of who might lose out as China buys more U.S. farm goods

“The U.S. list of top 30 greatest potential goods exports to China is missing energy and assorted other agricultural products that are integral to a deal,” the economists wrote. “In other words, the U.S. appears to have limited potential to export many of the other products that China wishes to buy, either as part of an impending trade deal, or as a reflection of general Chinese demand for goods.”

Bolstering trade between China and the U.S. by diverting it away from existing partners could also worsen relations with other countries, according to the Citigroup economists. For example, greater exports of American soybeans to the Asian nation would likely displace Brazilian supplies while auto sales would disrupt China's trade with Japan and Germany, they said.

To contact the reporter on this story: Alexander Kwiatkowski in Singapore at akwiatkowsk2@bloomberg.net

To contact the editors responsible for this story: Pratish Narayanan at pnarayanan9@bloomberg.net, Andrew Hobbs

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