U.S.-China Trade Stayed Robust in 2022. Will That Last?, A ChinaFile Conversation, Feb. 28, 2023.
Trade figures for 2022 released earlier this month show U.S.-China goods trade hit a record high of $690.6 billion, despite ongoing tensions. U.S. imports from China grew 6.3 percent, to $536.8 billion, while exports rose 1.6 percent to $153.8 billion. Those figures might appear surprising given Trump tariffs (and retaliatory Chinese tariffs), Biden-era export controls (including sweeping semiconductor exports restrictions), and hundreds of billions of dollars in subsidies to lessen reliance on China.
While U.S. Secretary of Commerce Gina Raimondo stressed in a December speech that the U.S. is “not seeking the decoupling of our economy from that of China’s,” such regulations suggest a more complicated picture. How should we interpret these latest figures? Do these numbers obscure medium and long term trends? Or will the U.S. and China remain strong trading partners despite growing restrictions and strains in their broader relationship? —The Editors
Comments
Wendy Cutler
The recent 2022 U.S.-China goods trade figures underscore that despite escalating geopolitical tensions, continued high tariffs, and a barrage of export controls and regulatory restrictions, the U.S.-China trade relationship remains robust. U.S. exports of agriculture, semiconductors, and oil to China topped the list, while Chinese exports of communications and computer equipment have continued to be strong. We are still awaiting services trade data for the year.
But 2022 may have been the peak year for U.S.-China trade flows for a number of reasons. First, higher prices due to inflation boosted the value of trade. Second, lingering COVID spending habits continued into at least the first part of the year, elevating the U.S. demand for items such as laptops, phones, and toys. The impact of both of these factors is already diminishing in 2023.
On top of that, the U.S. economy is cooling off, indicating a likely decrease in imports, including from China. The pace and magnitude of China’s economic comeback are also uncertain, which could impact Chinese demand for U.S. exports. The IMF forecasts that the Chinese economy will grow by 5.2 percent this year after a dismal 3 percent showing in 2022. But IMF officials have not been shy in highlighting serious short-term and longer-term economic challenges that Beijing must navigate. The impact of these challenges on economic growth in 2023 and beyond cannot be ignored.
Moreover, the U.S. and China are trying to reduce their economic reliance on each other. While these untangling efforts are largely focused on strategic and emerging high-technology goods, the lines are increasingly blurred between what is and what is not strategic. Washington and Beijing are seeking to achieve this by increasing their domestic capacity and capability to make more stuff at home and diversifying import sources and export markets. The U.S. is embracing government subsidy policies while China continues its multi-billion-dollar effort to foster national champions. In addition, both countries are strengthening economic and supply chain ties with countries in Southeast and South Asia, Africa, and Latin America. Not a week goes by without Washington or Beijing announcing a new initiative or dialogue with eager partners.
Meanwhile, U.S. boardroom discussions are focusing on how to reduce their footprint in China, as they see the writing on the wall—with little sign of geopolitical tensions abating, business plans must be adjusted. Other factors are also driving these shifts, such as China being less competitive for labor-intensive production. This doesn’t mean that all companies are packing up and leaving China. While some are, many others are pursuing a “China plus one strategy” for supply chain inputs, and considering other global destinations for new product lines.
All of this suggests that we are likely to see increased U.S. trade with other parts of the world in the years ahead and a downward trend line for bilateral trade with China. But how steep that line will be is uncertain. While some product areas, such as agriculture, consumer goods, and environment-related products, may continue to experience strong trade flows, it seems doubtful that U.S.-China trade will break the 2022 record anytime soon. Trade with other Asian countries is likely to increase as U.S.-China trade steadily decreases.
(To be continued…)