US-China Trade is Close to a Record, Defying Talk of Decoupling

onebyone · Jan 18, 2023

US-China Trade is Close to a Record, Defying Talk of Decoupling

Fight over tech curbs hasn’t yet hit broader flow of goods
‘Draconian’ cut in trade isn’t likely, Brookings analyst says

By
Daniel Flatley
17 มกราคม 2566 12:00 GMT+7Updated on17 มกราคม 2566 23:05 GMT+7
Trade between the US and China is on track to break records, a signal of resilient links between the world’s top economies amid the heated national security rhetoric in Washington and fears of “decoupling.”

US government data through November suggest that imports and exports in 2022 will add up to an all-time high, or at least come very close, when the final report comes out Feb. 7. Beijing just published its own full-year figures that show record trade of around $760 billion.

US-China Trade on Track to Break Records

Despite heated rhetoric, trade with China shows no signs of slowing down

Source: US Census Bureau
Note: Figures for December 2022 based on an average of the past five years
There are some caveats. Trade slowed toward the end of the year, as US import demand cooled and China struggled to manage its Covid restrictions. And the trade data isn’t adjusted for inflation, which means higher dollar figures may not translate to more goods shipped.
Still, they’re striking numbers in an era when tough-on-China is the closest thing there is to bipartisan consensus in Washington. They illustrate how deeply entwined the two economies remain — even as the US aims to hold back China’s advance and Beijing seeks to counter Washington’s global influence.
There have been positive signs recently, including the first face-to-face meeting in November between presidents Joe Biden and Xi Jinping, and plans for more high-level connections, including a visit to China this year by Secretary of State Antony Blinken. But it’s unlikely the two will easily resolve their differences, including Beijing’s stance on Taiwan and the South China Sea, as well as Washington’s aggressive drive to restrict Beijing’s access to key semiconductor technology.

‘What Companies Want’

“Can we have this tech war and still have a very robust trading relationship in everything else? My instinct is ‘Yes,’” said David Dollar, senior fellow in foreign policy at the Brookings Institution. “It’s based on economic efficiency, it’s what companies want, it enables them to deliver goods and services to consume

The kind of “draconian decoupling” that some in Washington are advocating would have “a big negative effect on US living standards,” he said. “I just don’t think US policy is going to go down that road, whatever the rhetoric.”

US Advanced-Technology Exports to China

Source: US Census Bureau
Note: `Other' includes advanced materials, nuclear technology, weapons and opto-electronics
A similar calculus likely applies in China too, where trade-driven economic growth still holds the key to rising living standards and stability.

China’s top economic official, Vice-Premier Liu He, told the World Economic Forum in Davos on Tuesday that there’ll likely be a notable pickup in Chinese imports this year as the economy rebounds after a wave of virus infections, and said China opposes “unilateralism and protectionism.”

Read More: China Reassures Davos That Growth Will Rebound, Covid Has Peaked

Liu, who was his country’s chief trade negotiator with President Donald Trump’s administration, is set to meet Janet Yellen in Zurich on Wednesday, after the US treasury secretary announced a surprise change to her schedule.

US-China trade has largely survived the tariffs imposed under Trump and their continuation during the Biden administration, which has introduced a raft of its own measures aimed at slowing China’s ability to develop advanced semiconductors. Congress also passed legislation to target what lawmakers say are Chinese human rights abuses, and to bolster US chip manufacturing.

‘Existential Threat’

“This is a battle for technology supremacy,” said Mike Burns, a partner at Murray Hill Group, a private-equity and venture-capital firm that focuses on semiconductors. It doesn’t necessarily entail a wider trade rift, he said, because the two countries have different goals – tech leadership for the US, tech autonomy for China – and they’re not mutually exclusive.

But there is a risk that they end up on collision course, Burns said: “The US has to be careful that in protecting its leadership, it does not create an existential threat to China by eliminating their ability to move toward semiconductor independence.”