US President Biden is winning the trade war with China, judging by rival former President Donald Trump’s favorite metrics.
The problem is that the US trade deficit with China as a percentage of gross domestic product (GDP) is becoming increasingly flawed as a measure of the world’s most important economic relationship.
Bloomberg Economics (BE) predicts that the US trade deficit with China for 2023, to be announced on the 7th, will be around 1% of US GDP, the lowest percentage since 2003.
Shrinking Trade Deficit
US goods trade deficit last year was the smallest since 2003
Source: U.S. Census Bureau, Bureau of Economic Analysis, Bloomberg Economics
These numbers suggest that the U.S.-China economic decoupling is deepening due to tariffs and export controls that were first tightened under the Trump administration and then under the Biden administration. It will also serve as a politically important economic signal ahead of the presidential election in November. There is a growing possibility that this year’s presidential election will be a repeat of 2020, with Biden versus Trump.
Eswar Prasad, who specializes in trade and the Chinese economy at Cornell University and the Brookings Institution, said, “It seems like Mr. Trump said something tough and Mr. Biden got the results.” This conclusion can only be drawn if one considers the United States’ trade deficit with China as the correct measure of U.S. success and managing its trade relationship, he added.
Like many economists, Prasad has been alarmed for years by Trump’s use of trade deficits with foreign countries such as China as a key measure of whether the U.S. has an advantage or disadvantage in economic relations. It’s here.
Economists say the United States has had a foreign trade deficit since the 1970s, both as a result of trade policy and because foreign investors are attracted to dollar assets.
Vietnam and Mexico Buying a Lot More from China
With the rise in shipments to Vietnam highly correlated to exports to the US
Source: Vietnam Customs, INEGI
There is also a new reason why the trade deficit with China is an imperfect indicator. Shipments from China, Asia’s manufacturing powerhouse, to the United States are increasingly transiting through third countries such as Vietnam and Mexico.
Since the Trump administration imposed tariffs on about $300 billion (about 45 trillion yen) worth of imports in 2018, Chinese companies have increased investment in new factories in Mexico, Vietnam and other countries to avoid taxes. It’s here.
Tariffs “forced multinationals to look for alternative sources,” but “that doesn’t mean they become less dependent on China,” said Mary Peterson, senior fellow at the Peterson Institute for International Economics.lovelyHe pointed out.
In many casesAs the United States increases its imports from countries other than China, those countries’ economic ties to China are strengthening. Outside of the United States, “the world is becoming more integrated with China,” LaBrie said.
China’s Dominant Share of US Seaborne Imports
Vietnam has narrowed China’s huge lead as a goods exporter to the US
Source: Descartes Datamyne
Original title:Trump’s Favorite Metric Has Biden Winning the US-China Trade War (excerpt)
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2024-02-06 06:01:20
