Category Archives: trade

U.S. Imports from China Collapse in November 2022

U.S. imports of goods produced in China collapsed further in November 2022, continuing the plunge that began in September.

The following chart shows the year-over-year growth rate of the value of goods imported from China to the U.S. has collapsed into negative territory, confirming U.S. imports are shrinking.

Year Over Year Growth Rate of Exchange Rate Adjusted U.S.-China Trade in Goods, January 1986 - November 2022

We dug into the Census Bureau's detailed data on goods traded between the U.S. and China during November 2022. We found three categories of goods account for the bulk of the year over year reduction in goods imported from China. Here is the list:

  • Electric Machinery (primarily Smartphones, Monitors, and Electrical Heating Devices)
  • Automatic Data Processing Machines
  • Toys (not including Video Game Consoles)

The growth rate chart also shows U.S. exports to China held their single-digit year-over-year growth rate, but even that is misleading. The months of October through December represent the peak season for U.S. exports to China, which is dominated by soybeans. Updating the animated chart we featured last month, we find that while the value of 2022's exports of soybeans is setting new records, in real terms, the volume of soybeans being exported is well below the levels set in 2016, 2017, and 2020.

Animation: Cumulative Value of U.S. Soybean Exports to China by Month, 2016-2022 YTD (thru November)

Overall, the continuing collapse of U.S. imports from China has pulled the combined value of goods traded between the U.S. and China below a counterfactual trajectory based on the recovery of trade between the countries after 2008-09 Great Recession. The next chart shows the post-pandemic trade recovery is once again underperforming:

Combined Value of U.S. Exports to China and U.S. Imports from China, January 2017 - November 2022

As a general rule, growth trends for imports provide an indication of the relative health of the economy that is importing the goods. In this case, we think it's more an indication that the COVID lockdowns China imposed in October and November severely disrupted its production and export of the goods that saw the biggest year-over-year declines.

China's government was forced to reverse its lockdown policies in December 2022, with most of its restrictions lifted by early January 2023. That timing means we should anticipate at least one more month of negatively impacted imports from China before its government's policy reversal begins to be reflected in the trade data.

On the U.S. side of the trade ledger, we only have December 2022's data to be reported before we can close the books on 2022's soybean export season. After that data is reported in early February 2023, we anticipate U.S. exports to China will plunge since they will no longer be boosted by the inflated value of soybeans. These changes mean that trade between the U.S. and China will transition into a stronger headwind against the U.S. economic growth in 2023.

References

U.S. Census Bureau. Trade in Goods with China. Last updated: 5 January 2023.

U.S. Department of Agriculture. Soybeans - Price Received, Measured in $/bushel. [Online Database]. Accessed 8 January 2023.

U.S. Trade Online. [Online Database]. Accessed: 5 January 2023.

U.S. Imports from China Continue Plummeting, Soybean Exports Down in Real Terms

Data for October 2022 indicates the total value of goods being imported by the U.S. from China shrank year-over-year, pointing to developing weakness in the relative health of the U.S. economy. At the same time, the value of U.S. exports to China was up, but has dropped to single digit growth rates after hovering at a 20% year-over-year growth rate in both August and September 2022.

The following chart shows how these new developments fit into the modern history of trade between the two nations.

Year Over Year Growth Rate of Exchange Rate Adjusted U.S.-China Trade in Goods, January 1986 - October 2022

The shrinkage in the value of goods imported from China was more than enough to offset the slowed growth in U.S. exports to China, pulling the combined value of trade between the two countries down. The next chart illustrates that change has pulled the trajectory of trade down after having briefly outperformed a post-pandemic trade recovery counterfactual.

Combined Value of U.S. Exports to China and U.S. Imports from China, January 2017 - October 2022

The primary reason U.S. exports to China were positive in October 2022 is because of the inflation of soybean prices. Combined with having entered peak soybean export season, the cumulative value of soybean exports is setting records, although the cumulative quantity of soybeans exported is significantly below recent years. The following animated chart cycles between both sets of data, pay attention to 2022's levels for both.

Animation: Cumulative Value of U.S. Soybean Exports to China by Month, 2016-2022 YTD

At 2021's prices, we estimate the real value of 2022's U.S. soybean exports to China is running about 12% below 2021's levels.

References

U.S. Census Bureau. Trade in Goods with China. Last updated: 3 November 2022.

U.S. Department of Agriculture. Soybeans - Price Received, Measured in $/bushel. [Online Database]. Accessed 10 December 2022.

U.S. Trade Online. Soybean Exports to China. [Online Database]. Accessed: 10 December 2022.

The Seeds of Soybean Inflation

Every year, U.S. exports of soybeans peak during the months of October, November, and December. Since most of those exports head to China, we thought it might be interesting to take a snapshot of how 2022's crop is stacking up against previous years.

We pulled the available data on U.S. exports of soybeans to China from the U.S. Census Bureau's USA Trade Online database and calculated the month-by-month cumulative value of soybeans exported to China from January 2016 through the available year-to-date data for September 2022. We then estimated the quantity of soybeans exported each month by dividing these figures by the month's average soybean price per bushel. We generated two charts to illustrate the data and set them to cycle in the following animated chart, which takes us up to the beginning of the U.S.' peak soybean export season in 2022:

Animation: Cumulative Value and Estimated Cumulative Bushels of Soybeans Exported to China Each Month, January 2016 through 2022 Year-To-Date (September)

With the average price of soybeans mostly hovering within two dollars of $10 per bushel over this period, the cumulative value and quantity exported charts for most years are very similar to each other, including during the U.S-China trade war impacted years of 2018 and 2019. But two years really stand out as different from the others.

Let's start with the most obviously different. At first glance, the cumulative value of soybeans exported by the U.S. to China during 2022 leads all other years by a wide margin. But the animation quickly makes it very clear that the cumulative bushels of exported soybeans is very different, with 2022's quantity of exports far below 2016 and 2017's very high levels. That difference is directly attributable to the inflation of soybean prices, which began in 2021 and has continued in 2022.

2022's soybean price escalation is fairly easy to explain. Many of the soybean-growing regions in the U.S. experienced drought conditions, which both negatively affected crop yields and the ability of farmers to ship their crops to seaports by river. That drought comes as much of South America's soybean growing regions also experienced drought conditions during the year, with the resulting shortages boosting 2022's global soybean prices.

But it doesn't explain 2021's soybean price escalation, during which the seeds of today's soybean inflation were first sown. Here's the title of an article that identifies many of the additional factors that have contributed to that inflation.

Analysis: 'It's a madhouse': Organic U.S. soy prices hit record, fuel food inflation

Reading this October 2021 article, we find many of the underlying seeds behind today's soybean inflation were sown by several government interventions and failures that contributed to the shortages and price increases it describes for organic soybeans.

U.S. prices for organic soybeans used to feed livestock and manufacture soy milk have surged to record highs as imports that make up most of the country's supply have declined, triggering price increases for food including organically raised chicken.

The costly soybeans and higher-priced organic products are fueling food inflation at a time consumers are eager to eat better and focus on health during the COVID-19 pandemic. The $56 billion U.S. organic food sector is also grappling with a shortage of shipping containers and a tight labor market as global food prices hit a 10-year high....

U.S. imports of organic soybeans from September 2020 through August 2021 fell by 18% to about 240,585 tonnes, according to U.S. Department of Agriculture data. Shipments sank by 30% from Argentina, the biggest supplier to the United States.

Imports from India fell by 34%, extending a pre-existing decline after the United States in January toughened its requirements to certify Indian crops as organic.

There's a lot to unpack from this excerpt. First, we see the shortfall of organic soybean imports from India is directly attributable to the Biden administration's regulatory imposition of organic farming requirements as part of its anti-free trade measures aimed at protecting the special interests of a very small number of U.S. organic soybean farmers. Despite harming U.S. consumers, these anti-free trade measures have continued into 2022 with negative impact to both organic soybean prices and other downstream food products. Products like organic chicken, for example, that rely on consuming organic soybean feed to qualify as having been raised to meet arbitrary "organic" standards.

Meanwhile, the other factors the excerpt mentions also negatively impact the price of regular soybeans. The shortage of shipping containers is directly related to the Biden administration's leadership failures in addressing the logjam at the U.S.' west coast ports that it allowed to fester for months before taking its first actions to remedy it during October 2021. Finally, the shortfall of Argentina's soybeans can be traced to the Argentinian government's export policies, which have led many of its farmers to choose to stop growing soybeans in favor of corn, reducing the global supply.

None of these government interventions and failures would have stopped the drought conditions that inflated soybean prices throughout 2022. But that inflation would have been lower had they not contributed to starting the soybean inflation in the first place. In that regard, today's high inflation is very much a fiscal policy choice by politicians putting their special interests ahead of consumers.

U.S. Imports from China Plummet in September 2022

If August 2022's trade between the U.S. and China was defined by much stronger than expected exports flowing from the U.S. to China, September 2022's trade data is just as definable. Except in a negative sense, because U.S. imports of goods from China plummeted during the month.

It's still positive when measured year-over-year, but the growth rate of U.S. imports from China dropped to the low single digits from the double digit levels recorded in each month from December 2021 through August 2022. The following chart tracking the growth rate of U.S. exports to China and imports from China since January 1986 shows that sudden change.

Year Over Year Growth Rate of Exchange Rate Adjusted U.S.-China Trade in Goods
January 1986 - September 2022

This change follows the cancellation of billions of dollars in orders in recent months by major U.S. retailers, who have also cancelled or delayed plans to build warehouses to accommodate goods, many of which would have been imported from China.

The change also means that instead of following the seasonal pattern of September's total trade volume increasing above August's level, the combined value of goods traded between the U.S. and China fell month over month. That development can be seen in the next chart.

Combined Value of U.S. Exports to China and U.S. Imports from China, January 2017 - September 2022

Typically, the combined value of goods traded between the U.S. and China rises from August through October each year, peaking in October. 2022 is breaking that pattern, suggesting the relative health of the U.S. economy is declining going into the fourth quarter of the year.

Reference

U.S. Census Bureau. Trade in Goods with China. Last updated: 3 November 2022.

U.S. Exports to China Accelerate in August 2022

After picking up speed in July 2022, the value of trade between the U.S. and China accelerated in August 2022 on the strength of U.S. exports to China.

That's largely attributable to China's lifting of its goverment's zero-COVID lockdowns in its third-busiest port in late August 2022. This event coincided with early shipments of U.S. soybeans to China, the U.S.' top export to the country that typically peaks in the period from September to November each year.

These factors combined to lift the combined value of goods traded between the U.S. and China in August 2022, which can be seen in the following chart.

Combined Value of U.S. Exports to China and U.S. Imports from China, January 2017 - August 2022

The early surge in U.S. soybean exports will add a tailwind to U.S. economic growth in 2022-Q3. Similarly, China should see a rebound as well, though its ongoing government-mandated zero-COVID lockdowns represent a disruptive and negative force for its economy.

Reference

U.S. Census Bureau. Trade in Goods with China. Last updated: 5 October 2022. Accessed 5 October 2022.