Revealed comparative advantage, intra industry trade and the US manufacturing trade deficit with China

This paper uses 4-digit SITC data to identify groups of manufactured goods exported from China to the USA that have strong or rising comparative advantages. We find that most of the trades are inter-industty, with only a small portion being vertical intra-industry trades (IIT). Our results confirm that Sino-US trade is complementary. We construct an imbalanced index of HT, and identify the goods groups that aggravate and reduce the US trade deficit with China We suggest an approach for calculating a dynamic HT index that might mitigate the aggregation bias of the existing methodologies. Our improved index reveals that the dynamic imbalances of US-Chinese IIT manufactured goods are worse than their static HT imbalances, which means that it would be difficult to correct the deficit of US trade with China in the following couple of years. Adjusting and improving the structures of industries and products is China's major task for sustainable trade growth.