Posts tagged USA

The Motley Fool, an investing website, has some analysis of commonly-repeated statements about how the US is in economic thrall to China, which are actually not true. The key highlights:

Misconception: Most of what Americans spend their money on is made in China.

Fact: Just 2.7% of personal consumption expenditures go to Chinese-made goods and services. 88.5% of U.S. consumer spending is on American-made goods and services.

Misconception: We owe most of our debt to China.

Fact: China owns 7.8% of U.S. government debt outstanding.

Misconception: We get most of our oil from the Middle East.

Fact: Just 9.2% of oil consumed in the U.S. comes from the Middle East.

Going deeper, another interesting fact is that only half of that 2.7% actually goes to China in the form of import costs, while the other half is spent in the US on supply chain and retail tasks. The original Federal Reserve source says:

Goods and services from China accounted for only 2.7% of U.S. personal consumption expenditures in 2010, of which less than half reflected the actual costs of Chinese imports. The rest went to U.S. businesses and workers transporting, selling, and marketing goods carrying the “Made in China” label.

This is not to say that there are not serious issues with the US economy’s capacity to remain globally competitive, particularly when China and other countries are investing heavily in advanced technologies that are likely to drive a lot of growth. For example, see this piece from McKinsey on how the US has lost the lead it once had in many fields of technology, hindering its growth. But it’s important to keep these factors in perspective. With that in mind I’m looking forward to reading a book I just got, Advantage by Adam Segal (subtitled How American innovation can overcome the Asian challenge), which deals with these issues.