Submitted by Taps Coogan on the 20th of December 2019 to The Sounding Line.
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As the world awaits the elusive details of the recent trade-war ‘detente’ between the US and China, it is worth taking a moment to reflect on the effects that the trade war has had on bilateral trade so far.
According to the US Census Bureau, US goods imports from China reached an all-time record high of $52.2 billion in October 2018, while US exports to China amounted to just $9.1 billion.
Fast forward to October 2019, the most recent date for which Census Bureau data exists, and US imports from China have fallen to $40.1 billion and exports have fallen to $8.8 billion, a 23% decline in imports, but just a 3% decline in exports.
Cumulatively, US imports from China from January through October 2019 have shrunk by $60 billion (15%) and exports have shrunk by $14.7 billion (also about 15%), compared to the same period last year. The trade deficit has narrowed by roughly $50 billion (yet again, about 15%).
Without minimizing the psychological effects of the trade war, which have presumably contributed to a decline in business investment in the US, the actual decrease in US exports to China this year is less than one percent of total US goods exports from 2018. It’s a far cry from some of the more cataclysmic predictions that have been made over the last couple years. The decline in US exports to China is even smaller compared to the overall $21.5 trillion US economy, not even one tenth of one percent. In fact, because the trade deficit is subtracted from the GDP calculation, the $51 billion reduction of the US trade deficit with China actually increases US GDP by more than the decline in US exports decreases it.
Of course, the decline in trade has knock-on effects on both economies, which presumably outweigh the positive effect that the reduced trade deficit has on GDP. Furthermore, $14.7 billion is nothing to scoff at for the businesses and farmers losing those exports. However, it wasn’t that long ago that any structural reform in the wildly unbalanced US trade relationship with China seemed unfathomable. While it’s questionable whether any reform will actually end up taking place, at a minimum, this is now the largest reduction in the US trade deficit with China on record, barring the Global Financial Crisis.
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