June 2017 saw a fairly robust growth rate in the value of goods and services being traded between the U.S. and China, suggesting that economic growth between the world's two largest trade partners, as measured by the total value of goods traded between each, is relatively healthy.

The following chart shows the year over year growth rate of the exchange rate-adjusted value of goods and services imported and exported by the U.S. and China to each other for each month from January 1986 through July 2017.

Year Over Year Growth Rate of Exchange Rate-Adjusted U.S.-China Trade in Goods and Services, January 1986 - June 2017

The biggest surprise in the trade data continues to be the volume of U.S. oil and gas exports to China, which is now starting to be picked up by mainstream media organizations. Through the first six months of 2017, the value of U.S. oil and gas shipments to China has totaled over $3.6 billion, putting it just behind U.S. shipments of soybeans for the year to date, which have totaled $3.9 billion.

We mention soybeans because the third quarter is when the U.S. soybean harvest will get under way, where China will be the primary foreign customer for the crop. Compared to last year, we don't expect to see record quantities of U.S. soybeans being shipped to China, mainly because the world's top grower of soybeans, Brazil, has recovered from a 2016 drought with a strong crop this year, where we think that China will fulfill a larger share of its soybean needs from that nation.

It's worth watching because annual U.S. soybean exports have a significant effect on third quarter GDP, where 2016 was considerably stronger as a result of China's larger-than-expected demand for U.S. soybean exports because of the Brazilian drought.

Data Sources

Board of Governors of the Federal Reserve System. China / U.S. Foreign Exchange Rate. G.5 Foreign Exchange Rates. Accessed 6 August 2017.

U.S. Census Bureau. Trade in Goods with China. Released 4 August 2017. Accessed 6 August 2017.

U.S. Census Bureau. U.S. Trade Online. [Online Database]. Accessed 6 August 2017.