beijingwalker
ELITE MEMBER
- Joined
- Nov 4, 2011
- Messages
- 65,195
- Reaction score
- -55
- Country
- Location
China Is Winning The Trade War Says S&P - IHS On China's Declining Exports And Rising Trade Surplus
May 9, 2019 9:49 AM ET
dave in okla
Summary
Trade wars may or may not be easy, as Donald Trump claims.
They're always, but always, damaging to consumers.
But is China winning or losing? Exports are down, but the trade surplus is up.
China's trade statistics are out, and it's difficult to see who is winning or losing this trade war - other than consumers on either side of course. For Chinese consumers have to bear the costs of Chinese import tariffs and restrictions, American ones those imposed by the US. This before we even start to think about the costs imposed by domestic producers raising their prices now they're protected from that foreign competition. Yes, we do know this for the US at least:
Over the course of 2018, the U.S. experienced substantial increases in the prices of intermediates and final goods, dramatic changes to its supply-chain network, reductions in availability of imported varieties, and complete passthrough of the tariffs into domestic prices of imported goods. Overall, using standard economic methods, we find that the full incidence of the tariff falls on domestic consumers, with a reduction in U.S. real income of $1.4 billion per month by the end of 2018. We also see similar patterns for foreign countries who have retaliated against the U.S., which indicates that the trade war also reduced real income for other countries.
But let's put that political question aside and think about what is happening in the declared terms of that trade war. In the casting of that argument a decline in China's trade surplus with the US would be the US winning. That's not how trade works - the aim and point being to gain access to those lovely things made by foreigners - but that's how the logic is being deployed.
From S&P:
That looks like the US is winning. Except that's a battle, concerning the war:
On a net export basis therefore the U.S. “won” the trade war in April by $1.18 billion on a net export basis. Yet, taking the period since July when section 301 duties were first applied China’s exports are up $8.95 billion while its imports are down by $24.8 billion, i.e. a $33.7 billion gain in China’s net exports.
It's not, to put it mildly, obvious that the losses to American consumers are worth this.
We also have more detail from IHS Markit:
China's merchandise exports contracted 2.7% year on year (y/y) in April in terms of USD, down from a revised 13.8% y/y expansion in March, according to the General Administration of Customs. The decline in exports was broad across countries, led by the weakening demand from the US. Exports to the Japan, European Union and ASEAN softened as well.
That's an example of a very useful lesson about Chinese economic statistics. Chinese New Year moves around year to year, from some point in January to some point in February. The moveability means we cannot apply the normal seasonal adjustments as we do to Christmas in western economies. So "monthly" economic statistics in the first quarter of the year are near always suspect - if not entirely useless in fact. The swings balance themselves out by the time we come to quarterly figures. That March number is therefore to be disregarded on that Y on Y basis. April we're back to more direct comparability.
In terms of what's likely going forward, IHS tells us:
IHS Markit maintains its expectation of China’s weaker export growth this year on vulnerable global economic growth.
Rebound in imports is expected and likely to continue in the coming months due to the government’s on-going stimulus policy to stabilize economic growth.
Global economic growth is slowing therefore so will exports. Imports will be subject to the success of domestic Chinese reflation efforts. We therefore expect that trade surplus to shrink - unless of course we get more of these unwanted effects from that trade war.
https://seekingalpha.com/article/42...chinas-declining-exports-rising-trade-surplus
May 9, 2019 9:49 AM ET
dave in okla
Summary
Trade wars may or may not be easy, as Donald Trump claims.
They're always, but always, damaging to consumers.
But is China winning or losing? Exports are down, but the trade surplus is up.
China's trade statistics are out, and it's difficult to see who is winning or losing this trade war - other than consumers on either side of course. For Chinese consumers have to bear the costs of Chinese import tariffs and restrictions, American ones those imposed by the US. This before we even start to think about the costs imposed by domestic producers raising their prices now they're protected from that foreign competition. Yes, we do know this for the US at least:
Over the course of 2018, the U.S. experienced substantial increases in the prices of intermediates and final goods, dramatic changes to its supply-chain network, reductions in availability of imported varieties, and complete passthrough of the tariffs into domestic prices of imported goods. Overall, using standard economic methods, we find that the full incidence of the tariff falls on domestic consumers, with a reduction in U.S. real income of $1.4 billion per month by the end of 2018. We also see similar patterns for foreign countries who have retaliated against the U.S., which indicates that the trade war also reduced real income for other countries.
But let's put that political question aside and think about what is happening in the declared terms of that trade war. In the casting of that argument a decline in China's trade surplus with the US would be the US winning. That's not how trade works - the aim and point being to gain access to those lovely things made by foreigners - but that's how the logic is being deployed.
From S&P:
That looks like the US is winning. Except that's a battle, concerning the war:
On a net export basis therefore the U.S. “won” the trade war in April by $1.18 billion on a net export basis. Yet, taking the period since July when section 301 duties were first applied China’s exports are up $8.95 billion while its imports are down by $24.8 billion, i.e. a $33.7 billion gain in China’s net exports.
It's not, to put it mildly, obvious that the losses to American consumers are worth this.
We also have more detail from IHS Markit:
China's merchandise exports contracted 2.7% year on year (y/y) in April in terms of USD, down from a revised 13.8% y/y expansion in March, according to the General Administration of Customs. The decline in exports was broad across countries, led by the weakening demand from the US. Exports to the Japan, European Union and ASEAN softened as well.
That's an example of a very useful lesson about Chinese economic statistics. Chinese New Year moves around year to year, from some point in January to some point in February. The moveability means we cannot apply the normal seasonal adjustments as we do to Christmas in western economies. So "monthly" economic statistics in the first quarter of the year are near always suspect - if not entirely useless in fact. The swings balance themselves out by the time we come to quarterly figures. That March number is therefore to be disregarded on that Y on Y basis. April we're back to more direct comparability.
In terms of what's likely going forward, IHS tells us:
IHS Markit maintains its expectation of China’s weaker export growth this year on vulnerable global economic growth.
Rebound in imports is expected and likely to continue in the coming months due to the government’s on-going stimulus policy to stabilize economic growth.
Global economic growth is slowing therefore so will exports. Imports will be subject to the success of domestic Chinese reflation efforts. We therefore expect that trade surplus to shrink - unless of course we get more of these unwanted effects from that trade war.
https://seekingalpha.com/article/42...chinas-declining-exports-rising-trade-surplus
