American companies are doing much more in China than the U.S. trade deficit suggests. It’s their greatest weakness. The deficit, the difference between what the United States imports from China and what it exports there, widened to $375 billion last year. It sounds like a lot. U.S. President Donald Trump and others take it as evidence that the relationship between the world’s two largest economies is out of whack.

But comparing imports to exports is not a full picture of American commerce with China. A closer look reveals that U.S. firms are in significantly better shape than the deficit suggests — and therefore also are more vulnerable to a trade war.

The huge missing ingredient in the trade deficit number is the business done in China by American companies. General Motors Co. sells more cars in China than at home. There are more Apple Inc. iPhones used in China than in the U.S. Overall, China subsidiaries of U.S. companies sold $223 billion of stuff in 2015, according to research by Deutsche Bank AG.

Much of that business isn’t reflected in the deficit figures reported each month by the U.S. Commerce Department because the goods never actually cross a border. American firms’ output is produced in China and sold in China. In the U.S., Chinese firms don’t make and sell nearly as much. Deutsche Bank’s estimate was just $22 billion.

That’s ultimately a weakness in Trump’s trade skirmish. U.S. companies are very exposed to retaliation by China that might go way beyond the question of tit-for-tat tariffs on imports.

The travails of Lotte Group might be instructive. The South Korean conglomerate was building a $2.7 billion theme park in China. Then relations between Seoul and Beijing deteriorated. China halted work on the theme park, in Shenyang in China’s northeast, when tensions flared over South Korea’s deployment of a U.S. missile shield in 2016. Lotte was also forced to suspend department store operations after alleged violations of fire safety rules. South Korean airlines were hampered, as was Hyundai Motor Co.

Trump has proposed tariffs worth $50 billion on Chinese imports as part of a formal process under Section 301 of the Trade Act of 1974. In what might have been a fit of pique, he ordered officials to consider a further $100 billion. U.S. exports to China amounted to $130 billion last year. If China retaliates in kind, it will run out of U.S. products to hit with tariffs. It might resort to measures other than tariffs. All those Chinese subsidiaries of U.S. companies suddenly look like a target.

These operations are critical for American business. As sales overseas become more important for U.S.-based firms, China becomes more important still. The U.S. is due for a recession in the next few years; the expansion that began in 2009 is now almost the longest ever. At some point it will end. Strong operations offshore will compensate for softness at home.

American finance and industry, through their global sway and their presence in China, have access to some very senior Chinese officials. Of course big businesses are also influential in U.S. politics. There is hope for companies to steer both administrations away from punitive trade actions. Back channels may be the key to avoiding a trade war.

Corporate America is far bigger in China than the trade deficit would have you believe. Trump should keep in mind that the U.S. has a lot to lose.

Daniel Moss writes on economics for Bloomberg View.

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