Category Archives: trade

U.S.-China Trade Growth Slows in March 2022 Ahead of Shanghai Lockdown

After surging in February, the growth rate of U.S. exports to China slowed to single digits in March 2022. At the same time, the year-over-year growth of U.S. imports from China also slowed, but not as much as U.S. exports did.

But none of that takes China's new COVID lockdowns in its largest trade hub of Shanghai into account, which was imposed by China's government on 28 March 2022. That lockdown is projected to continue well into May 2022.

That means our chart tracking the recovery of trade between the U.S. and China following the initial phase of the coronavirus pandemic in 2020 is uniquely capable of assessing the impact of China's Shanghai lockdown will have on that recovery. That's because right now, it shows no impact from China's new lockdown, while the trailing twelve month average (the heavy black line) of the combined value of goods traded between the U.S. and China is starting from a point that's narrowed to fall within a small gap of our projection of what that recovery would look like without China's continuing zero-COVID lockdown policies.

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

That narrowing is an unexpected bonus in that regard, since we had anticipated the gap between the actual trailing year average and the counterfactual would open slightly wider following February's exceptionally strong year-over-year gain.

The impact of the Chinese government's lockdown of Shanghai is already being felt in U.S. ports through shipping delays.

Those delays are developing at the same time U.S. ports are making progress in unloading the backlog of container ships inbound from China, which the Biden administration had allowed to develop and fester in 2021. We're excited to see how these factors might alter the trajectory of trade captured in our chart.

References

U.S. Census Bureau. Trade in Goods with China. Last updated: 4 May 2022. Accessed 4 May 2022.

U.S. Exports to China Lifts Trade Trajectory

U.S. exports lifted the trajectory of trade between the U.S. and China in February 2022.

Year over year, the value of those exports surged by 22% overall, with a third of the increase represented by agricultural goods, including cereal grains, soybeans, and cotton. The single biggest growth category however was pharmaceutical products, which accounted for 19% of the year over year gain and makes sense given China's continuing problems with coronavirus infections. Exports of U.S. mineral fuel oils also increased significantly in the year over year measure, with much of the remaining increase spread over multiple categories.

We should also note that much of the year over year gains resulted because February 2021 had seen an unusually low level for U.S. exports to China. That volatility can be seen in the following chart tracking the trailing twelve month average of the combined value of that trade as the heavy black line, where the counterfactual is shown by the dashed red line. We're using the trailing twelve month average to account, in part, for the seasonality in the actual monthly data, which we've shown as the thinner purple line.

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

Much as February 2021's trade level between the U.S. and China was unusually low, March 2021's trade level was unusually high, so we anticipate the gap between the actual trajectory of U.S.-China trade and our counterfactual will open up when March 2022's data becomes available.

References

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

Signs of Stalling Growth for Earth’s Economy

The pace at which carbon dioxide is increasing in the Earth's atmosphere slowed significantly according to data recorded at the remote Mauna Loa observatory for March 2022. The following chart shows the latest development for the trailing twelve month average of year-over-year change in the atmospheric concentration of carbon dioxide:

Trailing Twelve Month Average of Year-Over-Year Change in Parts per Million of Atmospheric Carbon Dioxide, January 2000 - March 2022

That change interrupts what had been a robust upturn in CO₂ emissions, driven primarily by China's record coal spree in recent months. The new change however coincides with indications that China's economic growth has sharply slowed in 2022, as indicated by its negative year-over-year growth rate for imports from the United States for December 2021 and January 2022.

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

That reduction is attributable to China's ongoing struggle with COVID-19, which disrupted economic activity in the Earth's biggest emitter of carbon dioxide in both December 2021 and January 2021. Allowing for the lag in China's carbon dioxide emissions to diffuse into the Earth's air, we think that economic slowdown is now showing up in March 2022's atmospheric CO₂ measurements. With China's government still committed to its COVID-zero policies and still locking down millions of China's productive population for weeks at a time as coronavirus infections continue to spread in the country despite its measures, we anticipate reduced carbon dioxide emissions will show up in the Earth's air from the world's biggest carbon emitter over the next several months.

National Oceanographic and Atmospheric Administration. Earth System Research Laboratory. Mauna Loa Observatory CO2 Data. [Text File]. Updated 7 March 2022. Accessed 9 March 2022.

U.S.-China Trade Growth Recovery Underperforming "Great Recession"

Having closed the door for assessing the performance of the January 2020 'Phase 1' trade deal between the U.S. and China, we've refocused our ongoing trade analysis to focus on the trade recovery from 2020's coronavirus pandemic.

To do that, we need to compare the actual trajectory of the trade between the U.S. and China with a counterfactual - a projection of what the future for trade could reasonably look like following a recession. For our purposes, we opted to model a counterfactual after the recovery in trade between the U.S. and China that followed the so-called "Great Recession". The following chart shows the trailing twelve month average of the combined value of that trade as the heavy black line, where the counterfactual is shown by the dashed red line. We're using the trailing twelve month average to account, in part, for the seasonality in the actual monthly data, which we've shown as the thinner purple line.

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

Going by the trailing twelve month average of the combined value of goods exchanged between the U.S. and China, the recovery in trade between the two countries began after this measure bottomed in September 2020. In the first ten months since, up to July 2021, the rate of growth of trade outperformed what was observed in the recovery following the "Great Recession". But since July 2021, the level of trade has consistently underperformed the Great Recession trade recovery. In January 2022, it would take an additional $1.2 billion of goods traded between the two countries to match that earlier recovery.

In truth, that underperformance took hold several months earlier, following March 2021, after a spike in the value of goods traded between the two countries was recorded. This period roughly coincides with a growing backlog of container ships at the U.S.' west coast ports, and specifically at the ports of Los Angeles and Long Beach in southern California. These two ports typically account for 40% of all imported goods processed into the U.S. economy, where congestion at these two ports built up and was allowed to fester for months without any action to correct the worsening situation by the Biden administration.

The good news is that after months of neglect, the Biden administration was finally forced to take steps to address the problem. There are indications the worst of the trade congestion at these two ports is in the rear view mirror.

That's a positive development, which we see in the small narrowing of the gap between the counterfactual and the actual trajectory of the U.S.-China trade level in January 2022. We'll see how well that progress might continue in the months ahead.

Closing the Door on the U.S-China ‘Phase 1’ Trade Deal

The U.S.-China 'Phase 1' trade deal signed by U.S. President Donald Trump and Chinese Premier Xi Jinping on 15 January 2020 is a failure.

That is the assessment of analysts and Biden administration trade officials, who point to the failure of Chinese officials to live up to their part of the agreement. The deal had required China to boost its purchases of U.S.-produced goods and services by $200 billion over two years. The following excerpt describes how far China fell short according to their analysis:

An analysis of final 2021 Census trade data compiled by economist Chad Bown of the Peterson Institute for International Economics showed China met just 57% of its full two-year goods and services targets.

Beijing’s purchases of the goods, energy and services targeted in the Phase 1 agreement were not even enough to return to China’s baseline 2017 level of purchases of U.S. imports after retaliatory tariffs had eroded them in 2018 and 2019, he said.

"Put differently, China bought none of the additional $200 billion of exports Trump’s deal had promised," Bown said in his analysis here....

Deputy U.S. Trade Representative Sarah Bianchi said last week it was "really clear that the Chinese haven't met their commitment in Phase 1" and the Biden administration was working with Chinese officials here to address the matter.

Political Calculations has tracked the outcome of the 'Phase 1' trade deal between the U.S. and China from the beginning, so we have some insight into the shortfall. As part of that analysis, we created a counterfactual, or rather, a projection of how trade between the U.S. and China would be expected to grow after the deal was struck.

But that projection ignored any contribution that might come from the additional $200 billion worth of U.S.-produced goods and services that Chinese officials committed to buy over the next two years.

Had everything gone as negotiated, that counterfactual projection would have provided an easy way to measure how much more growth in the value of goods and services traded between the two nations had occurred as a result of the agreement. But in reality, the onset of the coronavirus pandemic in China meant it became our primary means to directly measure the impact of the pandemic on trade between the U.S. and China. Here's the final update to our chart in which we've tracked that evolution.

Combined Value of U.S. Exports to China and Imports from China, January 2008 - December 2021

Collectively, we find the cumulative net loss of trade attributable to the coronavirus pandemic from January 2020 through December 2021 is $176 billion, which is visualized as the gap between the heavy black line and the dashed red line representing what instead became a "no coronavirus pandemic" counterfactual.

If China had met its 'Phase 1' trade deal obligations to purchase an additional $200 billion more U.S.-produced manufacturing, agricultural, and energy goods and services beyond the deal's baseline, we would instead have seen the heavy black line rise above the dashed red line before December 2021. That it generally parallels it while remaining consistently well below it confirms Bown's assessment. December 2021 marked the last month of China's obligation to make its 'Phase 1' trade deal purchases of additional U.S.-produced goods and services, so that door has now closed.

While the preceding analysis confirms China failed to meet its obligation, that failure is jointly shared with the Trump and Biden administrations, who could have done more to press for the success of the deal. That's especially true of the Biden administration, which both bought into the former president's trade strategy and benefited from strongly recovering economies in both China and the U.S. during its first year in office, but whose actions to press the Chinese to comply with their obligations under the deal have proven ineffectual.

References

Lawder, David. U.S. December trade data reveals massive shortfall in China's 'Phase 1' purchases. Reuters. 8 February 2022.

Lawder, David and Shalai, Andrea. U.S. trade official says China failed to meet 'Phase 1' commitments. Reuters. 1 February 2022.

U.S. Census Bureau. Trade in Goods with China. Last updated: 8 February 2022. Accessed 8 February 2022.

Previously on Political Calculations

Here is all the analysis we've presented in chronological order, starting from Month 0, when the 'Phase 1' trade deal between the U.S. and China was struck, all the way through December 2021, which marks the end of our coverage.