March 2023 saw an expected rebound in the value of goods traded between the U.S. and China.

After falling to the lowest level seen since the Coronavirus Pandemic in the previous month, the combined value of goods increased from $42.2 billion to $45.0 billion.

But that change wasn't enough to break an overall downtrend in the trade between China and the United States. Compared to a post-pandemic trade recovery projection based on how trade between the two nations recovered after the 2008-09 recession, the trailing twelve month average value of goods traded continued to fall. As of March 2023, the gap that has opened since October 2022 has widened to $6.3 billion.

Most of that development has taken place since October 2022. That month saw the Chinese government adopt new policies, in which the country's leaders put their geopolitical concerns ahead of economic ones.

These developments are indicated in the following chart:

Taking a closer look at March 2023's trade data, the collapse in the value of goods imported by the United States from China continued in March 2023. Year over year, the nominal value of those imports has fallen by 35%. Decreases affected 87 of 98 major categories of China's exports to the U.S. The biggest categories affected were consumer electronics (mobile phones, televisions) and industrial machine tools, both of which registered declines exceeding $3 billion each. Meanwhile furnishings and the category of toys, games and sports equipment each saw declines in excess of $1 billion. Together, these four categories of goods accounted for over half the reduction in the value of goods imported by the U.S. from China during the past year.

By contrast, U.S. exports to China increased during March 2023. Their level is 15% higher than what was recorded back in March 2022. The biggest increases were for exports of aircraft, coal and crude oil from the U.S. to China.

How does that compare with the United States' trade with the rest of the world during this period? The next chart gives an indication:

Since October 2022, we find total U.S. imports and exports are growing more slowly than U.S. imports and exports to the rest of the world without China. That can be seen using the parallel dotted lines as a visual reference. There's a very small gap between the total of U.S. imports and exports without China, but a growing one between the total of U.S. imports and exports for the entire world (including China).

That difference indicates the U.S. economy has only partially offset the effects of the decline in China's export of goods to the U.S. that has taken place since October 2022.

A country's imports provide a means of determining its relative economic health. In March 2023, the goods exchanged between the U.S. and China suggest slowing in the U.S. economy while China's economy experienced stronger growth. Even though the combined vale of trade between the U.S. and China improved over February 2022's level, what's hiding in March 2023's underlying trade data gives cause for concern.

References

U.S. Census Bureau. Trade in Goods with China. Last updated: 4 May 2023.

Image credit: Photo by Eric Prouzet on Unsplash.

The value of goods the U.S. imports from China fell when measured year-over-year for the fifth consecutive month in February 2023. That negative trend was sufficient to pull the combined value of goods traded between the two countries to its lowest point since the coronavirus pandemic.

You can see that development in the following chart that shows this monthly data series as the purple line. The chart also shows the trailing twelve month average of trade between the two countries has significantly deviated from the post-pandemic counterfactual based on the recovery of trade between the U.S. and China after the 2008-09's Great Recession. That deviation continues a trend that began after September 2022.

While February 2023's level is the lowest on record since the pandemic, there is a unique contributing factor that may account for a portion that outcome. China's annual week-long Spring Festival holiday took place from 21 through 27 January 2023, during which, China's port facilities process very few cargo ships. Given an average transit time of about three weeks to reach U.S. west coast ports, the absence of goods shipped from China to the U.S. because of the holiday would be expected to show up in February's trade data.

That's the most positive spin we can put on February 2023's trade data. To the extent that factor contributed to February 2023's import total, we should see a relative improvement when March 2023's data becomes available on 4 May 2023.

Looking forward to April 2023's data, a labor union action that shut the west coast's top container port on 7 April 2023 may negatively influence the month's import figures should the action spread to other facilities or be repeated.

References

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

Image credit: Photo by Steve Saunders on Unsplash.

January 2023 should have seen U.S. imports from China rebound following the Chinese government's lifting of its failed zero-COVID lockdowns at the end of December 2022. Because those lockdowns had greatly disrupted significant sectors of China's export-generating economy, their end should have opened the door to a much higher level of goods being shipped to the United States.

That didn't happen. While the level of China's exports to the U.S. increased by 2.5% from December 2022's total to $38.3 billion in January 2023, it fell far short of its potential. Compared with January 2022, the level of U.S. imports from China is down by 20.1%.

That shortfall is responsible for pulling down the combined value of goods traded between the U.S. and China, continuing a trend that began in September 2022. This latest development has further pulled the trailing twelve month average of 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 following chart shows the post-pandemic trade recovery is now $3.6 billion below the alternate trajectory:

Looking forward, the latest trade news coming out from China indicates that shortfall will continue into February:

China's exports for the January-February period fell, pointing to continued weakness in foreign demand and backing government concerns that a global slowdown will hamper the country's recovery from pandemic-era damage.

Imports dropped, too, government data showed on Tuesday, also reflecting weak foreign demand, since the country brings in parts and materials from abroad for many of its exports.

"Given the high inflation in the U.S. and Europe, demand from there should keep weakening, which also dampens the processing demand in China," said Iris Pang, chief economist for Greater China at ING.

Adjusted for inflation, the real value of goods being traded between the U.S. and China has fallen by more than the official customs data indicates.

References

U.S. Census Bureau. Trade in Goods with China. Last updated: 7 March 2023.

Image credit: Photo by Steve Saunders on Unsplash.

As expected, after having collapsed in November 2022, U.S. imports of goods produced in China shrank again in December 2022. That outcome continues the plunge that began in September 2022.

The net effect of this change has been to pull the trailing twelve month average 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 following chart shows the post-pandemic trade recovery has fallen some $2.7 billion below the alternate trajectory:

That's the most negative development for this data series since 2020's Coronavirus Pandemic Recession. Unlike that event, this new decline was primarily caused by the Chinese government's zero-COVID lockdowns, which were imposed in October and November.

It wasn't until late-December 2022 that 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 see the effects of the Chinese government's policy reversal start to be reflected when January 2023's trade data becomes available next month.

References

U.S. Census Bureau. Trade in Goods with China. Last updated: 6 February 2023.