Trade relationship between the US and China is marked by tensions of unusual intensity

Foreign trade data for the entire past year is not yet known, but those published in early January for November by the US Department of Commerce confirm it: imports of products from China are no longer flowing at the same pace.

It is true that 2022 should break the record for Chinese imports to the United States, but during the first eleven months of the year, the North American country will have imported more, in value, from the European Union than from the Asian giant, the second largest economy in the world. world.

Except in 2019, when the trade war between the two countries was in full swing, this hadn’t happened since 2008.

“There has been a realignment of globalization since 2018,” said Robert Koopman, a professor at American University in Washington, and a former chief economist at the World Trade Organization (WTO).

“Companies are looking to diversify their supplies to avoid Sino-US geopolitical tensions, the effects of the pandemic, but also disruptions caused by climate risks” in a specific geographic area, he explained.

After two years of decline, in 2019 and 2020, under the effect of the trade war between the two powers and after the difficulties in world trade due to the pandemic, US imports from China reactivated in 2021, but without returning to their previous level.

“Substitution”

Above all, according to a study by the Washington-based Peterson Institute for International Economics (PIIE), imports from China have recovered at a slower pace than before the start of the trade war, unlike purchases from the rest of the world. .

“Definitely, there was some substitution of suppliers” that went from China to other countries such as Vietnam or Mexico, said Mary Lovely, a researcher at PIIE, explaining that this is partly due to Chinese investors themselves opening factories outside their country of origin. source.

“In Mexico it’s something different,” Lovely said. “There was some Chinese investment, but mostly it’s multinationals that want to get closer to the US market.”

At the CES technology show in Las Vegas in early January, a Chinese electronics company, Etech, unapologetically highlighted its factories in Vietnam.

In constant progress for two decades, Vietnamese exports have also gained real momentum since 2018, more than doubling their value, thus making that Asian country one of the main trading partners of the United States.

Imports from other Asian countries are also growing strongly: Taiwan, South Korea and even Malaysia are gaining market shares in the United States.

Disengage?

Are these the first signs of a decoupling between the US and Chinese economies?

The issue divides experts, who still lack hindsight on the impact of US tariff policy and the health crisis on this exchange.

Ryan Sweet, chief US economist at Oxford Economics, stressed that Americans, once lockdowns were lifted, “spend a lot of money on products that are usually imported.”

But “now they spend more on services, which has an impact on the demand for goods and therefore on imports.”

An opinion that is partly supported by Emily Benson, a researcher at the Center for Strategic and International Studies (CSIS), based in Washington, for whom “although the pandemic is not over, economic actors and governments are beginning to act as if that were the case and trade returns to normal levels”.

However, one of the consequences of the “reorganization of world trade” and “geographic diversification (…) is to see that supply chains no longer start in China but in Southeast Asia or closer to the United States”, added.

At the same time, US regulations, such as the recent Inflation Reduction Act (IRA) or the Chip Act, which seeks to return part of semiconductor production to the United States, “are clear indicators of the desire of the Joe Biden administration to disengage from China,” according to Koopman.

But the intertwining of the two economies is such that such an effect seems difficult to achieve.

“Tensions are growing between the United States and China,” Sweet admitted. “But that doesn’t mean the United States will stop importing Chinese products. Over time, we will see a diversification of supplies, especially as manufacturers will no longer put all their eggs in one basket.”