Two economists from the Federal Reserve Bank of San Francisco published an interesting report this week that analyzed the potential for Chinese currency inflation to affect U.S. consumer expenditures.
In non-wonky English, they looked at how much money Americans spend on goods and services from the U.S. vs. China. What they found is that only a tiny percentage of our spending actually ends up in the hands of the evil communist Chinese.
The fed report is pretty damning when you look at in terms of the pre-conceived narratives about China that we’ve been told by both the commie-hating right and the Walmart-hating left.
The reality is that while, yes, we are running a trade deficit with China, we spend most of our money on services, not goods, which tend to be provided by other Americans. And even when we do buy products imported from China, much of the cost of those goods goes to things like transporting them within the U.S.
Obviously, if a pair of sneakers made in China costs $70 in the United States, not all of that retail price goes to the Chinese manufacturer. In fact, the bulk of the retail price pays for transportation of the sneakers in the United States, rent for the store where they are sold, profits for shareholders of the U.S. retailer, and the cost of marketing the sneakers. These costs include the salaries, wages, and benefits paid to the U.S. workers and managers who staff these operations.
The economic data shows that even when we import lots of “Made in China” labeled goods, we’re still keeping 55% of the total cost of that good inside the U.S.! This is fundamentally why I don’t fear the rise of China. Even among durable goods, 67% are still made in the U.S.
