The U.S. Census Bureau recently reported that the United States' 2021 goods trade deficit with China rose by $45 billion, or 14.5%, to $355.3 billion, the largest since a 2018 record of $418.2 billion, according to a report by Reuters.
The data showed that China did not satisfy its commitments to buy an additional $200 billion worth of farm and manufactured goods, energy, and services above 2017 levels from the United States. Additionally, the purchases China made did not reach the 2017 baseline level.
"We have engaged the PRC (People's Republic of China) on its shortfalls for months but have not seen real signs toward making good on the purchase commitments and our patience is wearing thin," Adam Hodge, a spokesperson for the U.S. Trade Representative's (USTR) office, said in an emailed statement to Reuters.
The purchase commitments were the result of negotiations under President Donald Trump that resulted in the Phase 1 Trade Deal that averted an escalating trade war. According to Hodge, it failed to tackle the root causes of the rising trade deficit.
"Regardless of how these negotiations conclude, the fact remains that the Phase One Agreement did not address the core problems with the PRC's state-led economy," Hodge said, adding that the Biden administration would "shape the environment around China" by building U.S. competitiveness, diversifying markets and limiting the impact of China's "harmful practices."
Liu Pengyu, a spokesperson for China's embassy in Washington, said China has been working on implementation of the agreement "despite the impact of COVID-19, a global economic recession and supply chain disruptions," Reuters reported.
The Phase 1 deal benefits China, the U.S. and the world, Liu added.
An analysis of 2021 Census trade data compiled by economist Chad Bown of the Peterson Institute for International Economics, showed China only met 57% of its two-year goods and services targets.
"Put differently, China bought none of the additional $200 billion of exports Trump’s deal had promised," Bown said in his analysis.
Jamieson Greer, former USTR chief of staff, who helped negotiate the Phase 1 deal, told Reuters that a clause in the agreement, which specifies the U.S. and China "project that the trajectory of increases (in China's purchases) will continue in calendar years 2022 through 2025," could be used to pursue "retrospective enforcement for what's been missed."
"It's in the interest of the administration to pursue enforcement," said Greer, a trade lawyer with King and Spalding. “With a few exceptions, we haven't really seen that much enforcement."