US trade flows are realigning on the back of pandemic shocks and tensions with China, but efforts to reduce interdependence between the superpowers have not brought a swift decoupling.
While security concerns have escalated and US imports from China fell after Washington and Beijing imposed tit-for-tat tariffs, trade has since climbed again.
The numbers could rise further when 2022 trade data is released next month, pointing to how interlaced the world’s two biggest economies are.
But experts say tensions have left their mark in other ways.
“US imports from China are well below the trend that they were on before the trade war started,” said Mary Lovely, senior fellow at the Peterson Institute for International Economics (PIIE).
“There is definitely a turn away from China in US imports, especially or primarily in those goods on which the US raised tariffs,” she told
AFP.
After the trade war started, the value of America’s goods imported from China dropped from $506 billion in 2017 to around $450 billion in 2019.
Bilateral relations are not the only factors affecting trade. The pandemic taook a heavy toll as well.
Last November, China saw its sharpest drop in exports since the start of Covid-19, with business activity slammed by a strict zero-Covid policy.
Also weighing on imports is an “ongoing shift in the US away from spending on goods,” said Ryan Sweet of Oxford Economics.
Americans spent heavily on imported products during the pandemic, but “people are going back out and spending on services” as virus concerns ease, he said.
This cuts into demand for goods and can help explain why numbers have not surged more.
– Diversification, not decoupling –
For now, US government figures through to November show total US-China trade could approach or hit a high in 2022.
“Going forward, you’re going to see more diversification,” as opposed to a complete cut-off of shipments from
China, said Sweet.
Auto manufacturers, for example, experienced supply chain problems during the
pandemic.
Increasing climate-related disruptions are also “raising the risks of overconcentrated supply chains in one firm or one geographic area,” said Robert Koopman, a lecturer at American University and a former World Trade Organization chief economist.
Meanwhile, the US is trying to be more self-reliant in specific sectors like semiconductors.
“The recent (Inflation Reduction Act) and Chips Act, and related sanctions are clear indicators of the Biden administration’s efforts to decouple from China” in these
areas, said Koopman.
Emily Benson, senior fellow at the Center for Strategic and International Studies (CSIS), added: “As companies reassess risk and review the current state of their supply chains, one consistent outcome is movement… away from China to other countries.”
Source: AFP
