Though few seem willing to admit it, U.S.-Chinese trade is improving
America’s trade with China, while far from equal, has nevertheless moved significantly away from its former state of imbalance. The pandemic has clouded the picture of last year, but now that the oppression of the virus is lifting – in the United States as well as in China – some statistical clarity has emerged. This image clearly shows a moderation in US imports from China and an acceleration in US exports to China. Some of this relative move reflects a shift in supply chains away from Chinese sources, but the numbers also clearly show that Beijing is complying with the trade deal it reached with Washington in 2019 and sealed just before the start of the pandemic. .
The changes in the supply chain are evident in the US import data. The robust response of the US economy to the lifting of restrictions linked to the pandemic has sucked imports into the country, as is typically the case when this country is growing rapidly. According to the Commerce Department, U.S. merchandise imports rose 33.7% in just nine months between last June and March, the most recent month for which data is available. But imports of goods from China increased only 6.9% during this period. Obviously, American companies are sourcing elsewhere. Part of this change is, of course, a matter of security – not so much national security as the security of supply lines. During the pandemic, China withheld several vital commodities. While Beijing’s action in the emergency is understandable, it’s just as understandable how it prompted U.S. buyers to diversify their sources, and they have clearly started to do so.
The abandonment of Chinese imports also has a longer-term component. For some time now, labor costs in China have been rising faster than in other less developed economies – Vietnam and Indonesia in Asia, for example, and, for some products, in Latin America. It is a natural reflection of states of development. This is why costs in China were so much lower than in the United States when the Chinese economy initially took off. As Chinese costs have increased with Chinese development, American buyers have turned elsewhere to source especially low-tech products, such as textiles and footwear, once almost exclusively from Chinese sources. This effect is evident in data before the pandemic or even the 2019 “trade war” with Trump’s White House. Between 2015 and 2018, for example, all imports of goods from the United States grew at an expansive annual rate of 15.7%, but those from China grew only 3.1% per year.
The export side of the US ledger captures the impact of the 2019 trade deal. According to the text of that deal, China has indeed promised to do two things. One was to stop stealing American technology either directly or through Beijing’s insistence that American companies doing business in China must have a Chinese partner and transfer all its technological and trade secrets to that partner. . It is of course difficult to measure compliance on these scores, but there are some positive signs. Beijing relaxed its insistence that US companies in China have a Chinese partner. This is particularly evident in finance, an area where Beijing previously had severely limited foreign access.
Beijing’s second promise in the deal was to buy more American goods from a fairly long list that the Commerce Department monitors each month. On this point, the statistics speak loudly. Since the signing of the agreement, US merchandise exports to China have grown at an annual rate of nearly 14.5%, far faster than the 0.6% annual growth of all US exports during this period. and also faster than the 1.25% annual growth in US exports to China. during the three years preceding the transaction. The recent acceleration in exports to China is even more impressive given that a large portion of US exports in the past consisted of components of goods that Chinese workers assembled and then re-exported to the United States, a trend that has continued to grow. fades with changes in US supply.
With the slowdown in American purchases in China and the acceleration of Chinese purchases of American products, the trade balance between the two countries has become much less unbalanced. The Commerce Department recorded the worst bilateral trade deficit in 2018, when China sold the country $ 419 billion more than the United States sold to China. In the first three months of 2021, that difference amounted to an annual rate of $ 284 billion, a huge deficit but a correction (if that’s the right word) of about a third. Whether this trend continues depends on the policies of Beijing and Washington as well as the inevitable ebb and flow of business cycles – in the United States and China and pretty much every country in the world that competes with or with that country. China. But for now, a major source of tension is easing.