If the US wants to reduce its trade deficit, it should attract more Chinese tourists

Doing their part for the trade balance.
Doing their part for the trade balance.
Image: Reuters/Lucas Jackson
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Chinese tourists love to spend money in the United States. If Donald Trump really wants to reduce America’s trade deficit with China, he should be wary of scaring them away.

In 2016, the latest data available, the US imported nearly $480 billion in goods and services from China. By contrast, China only imported $170 billion from the US. Trump hates this. He believes the imbalance means the US is “losing” to China, and has made it a central goal of his presidency to reduce the gap. Economic observers generally disagree that the deficit is such a bad thing.

One of the few areas where the US runs a trade surplus to China is in tourism. You may not think of goods and services sold to tourists as exports, but they are. Every time a Chinese person visits Disneyland and spends $100 on a day pass, in trade terms, that is the same as if they bought a $100 pair of shoes made in New York and shipped to Beijing.

No country’s travelers spend more in the US than China’s. In 2016, 3 million people arrived in the US from China, and they spent a total of $33.2 billion. About $12.5 billion of that came education-related travel. Mexico was a distant second, spending $20.3 billion.

Meanwhile, people traveling from the US to China only spent $5.4 billion in 2016. This means the US ran a roughly $28 billion surplus in the travel trade with China that year. (According to Trump’s mercantilist trade logic, perhaps the Chinese government should impose an extra tax on local residents who travel to the US.)

As recently as 2007, the Chinese hardly spent any more in the US than Americans did in China. It is only in the past decade that the ranks of well-heeled Chinese travelers swelled. In 2005, Chinese people spent less than $30 billion (in 2016 dollars) on international travel, but today they spend over $260 billion, making them the world’s most enthusiastic travel spenders. This is, in part, thanks to rising incomes and an increasingly powerful passport.

The US tourism sector makes up almost 3% of GDP (pdf) and close to 5% of domestic employment. Since 2015, although the number of arriving international travelers to the US has fallen—and spending has slowed along with it—the numbers and spending of Chinese visitors continues to rise.

Without Chinese visitors, the American tourism industry would be in big trouble. As Trump rails against Chinese trade practices and slaps tariffs on their goods, he may want to be careful not to alienate those who are considering visiting his country. If they choose not to come, the president’s policies may end up making the trade deficit even bigger.