FMT:
Trump, Biden policies shifted trade from China at a cost
A study shows that consumers face higher costs without clear offsetting benefits.
The US could remain indirectly connected to China through its trade with third-party countries. (Reuters pic)
JACKSON HOLE: US trade has shifted away from China due to policies enacted by the Biden and Trump administrations, but US reliance on China-linked supply chains has not necessarily been reduced and consumers have faced higher costs, according to new research presented today at a Federal Reserve economic symposium.
Despite deglobalisation fears after the coronavirus pandemic and Russia’s invasion of Ukraine, overall trade “has held steady at just under 60% of world (gross domestic product) rather than gone into freefall,” Laura Alfaro, an economist at Harvard Business School and Davin Chor, an associate professor at the Tuck School of Business at Dartmouth, concluded in their paper, which was presented at the annual gathering of central bankers and economists in Jackson Hole, Wyoming.
But US tariffs on Chinese goods, recently enacted industrial policies, and the pandemic, do seem to have touched off a “‘great reallocation’ in supply chain activity: Direct US sourcing from China has decreased,” from 21.6% of US imports as of 2016 to 16.5% last year, Alfaro and Chor wrote.
What’s less certain is what that means, with the authors saying the shift from China is raising prices for consumers without clearly providing offsetting benefits in the form of, for example, improved manufacturing efficiency in the US.
It is not even certain that the decline in China’s US import share represents a true delinking, they said.
Vietnam and Mexico, for example, appear to have captured much of the reallocated trade, the authors said, based on an analysis of goods import and export patterns, while an increase in US purchases of less processed goods from abroad was “indicative of some reshoring of production stages.”
And among companies, they said, “concerns are being voiced over the wisdom of sprawling supply chains that can expose firms and countries to the risk of disruptions,” from events like the pandemic or severe weather, or policy shocks like tariffs.
Yet in the background, the researchers noted that China had “stepped up” its trade and investment activity with Vietnam and Mexico, as well as other countries.
“The US could well remain indirectly connected to China through its trade and global value chain links with these third-party countries,” they argued.
Prices for goods from some countries, moreover, were beginning to rise.
“The recent policy restrictions to shift sourcing patterns or even to encourage substitution toward domestic inputs are poised to add to wage and cost pressures in the US,” the research found, a pointed conclusion as the Fed tries to lower inflation by slowing the US economy.
JACKSON HOLE: US trade has shifted away from China due to policies enacted by the Biden and Trump administrations, but US reliance on China-linked supply chains has not necessarily been reduced and consumers have faced higher costs, according to new research presented today at a Federal Reserve economic symposium.
Despite deglobalisation fears after the coronavirus pandemic and Russia’s invasion of Ukraine, overall trade “has held steady at just under 60% of world (gross domestic product) rather than gone into freefall,” Laura Alfaro, an economist at Harvard Business School and Davin Chor, an associate professor at the Tuck School of Business at Dartmouth, concluded in their paper, which was presented at the annual gathering of central bankers and economists in Jackson Hole, Wyoming.
But US tariffs on Chinese goods, recently enacted industrial policies, and the pandemic, do seem to have touched off a “‘great reallocation’ in supply chain activity: Direct US sourcing from China has decreased,” from 21.6% of US imports as of 2016 to 16.5% last year, Alfaro and Chor wrote.
What’s less certain is what that means, with the authors saying the shift from China is raising prices for consumers without clearly providing offsetting benefits in the form of, for example, improved manufacturing efficiency in the US.
It is not even certain that the decline in China’s US import share represents a true delinking, they said.
Vietnam and Mexico, for example, appear to have captured much of the reallocated trade, the authors said, based on an analysis of goods import and export patterns, while an increase in US purchases of less processed goods from abroad was “indicative of some reshoring of production stages.”
And among companies, they said, “concerns are being voiced over the wisdom of sprawling supply chains that can expose firms and countries to the risk of disruptions,” from events like the pandemic or severe weather, or policy shocks like tariffs.
Yet in the background, the researchers noted that China had “stepped up” its trade and investment activity with Vietnam and Mexico, as well as other countries.
“The US could well remain indirectly connected to China through its trade and global value chain links with these third-party countries,” they argued.
Prices for goods from some countries, moreover, were beginning to rise.
“The recent policy restrictions to shift sourcing patterns or even to encourage substitution toward domestic inputs are poised to add to wage and cost pressures in the US,” the research found, a pointed conclusion as the Fed tries to lower inflation by slowing the US economy.
Wakakakaka…
ReplyDelete"The US could remain indirectly connected to China through its trade with third-party countries"
Likening to all the EU members paying additional high middleman cost to buy Russian cruel oil/LNG from India/Turkey!
People who write such papers, and more importantly, "journalists" who report on such papers often have hidden agendas to slant what is written.
ReplyDeleteThe fact is the US Government actually earned only a Very Modest amount of additional Tax revenue from the China Tarrifs, therefore the Real level of cost increase to US consumers arising from the Tarrifs was Very Modest, in spite of all the politicised doomsaying.
It's all just Geopolitical polemics.
What it did was nudge some companies to diversify their supply chains instead of the stupid 100% China sourcing that many had adopted before 2016.
One of my Customers quit Malaysia and Thailand in 2004 to manufacture 100% in China. I told them they were making a big mistake, but they were blinded by all the Hype about China at the time.
Now they are back in Malaysia in 2023..wakakaka
The US authorities have been quite strict about ensuring genuine value-added from the countries stated as the exporter. So whether Malaysia, Thailand ,Vietnam or Mexico, they have to be Real factories, not just turn-a-few-screws type of operation.
You get found out doing that, you get kicked out of US export markets
What a inconsequential fart!
ReplyDeletePeople who disputed such papers, and more importantly, known yankee myrmidons who report on such papers often have hidden agendas to slant what is been written.
YES?
"The fact is the US Government actually earned only a Very Modest amount of additional Tax revenue from the China Tarrifs, therefore the Real level of cost increase to US consumers arising from the Tarrifs was Very Modest, in spite of all the politicised doomsaying"
Mfer, substantiating yr fart with numbers, not just empty words!
Ooop… yr back to m'sia customers could be due to FACT of unable to survive in a very tight & competitive China market! Blurred oversea opportunists couldn't understand the fast & tight margin marketing environment in China.
"The US authorities have been quite strict about ensuring genuine value-added from the countries stated by the exporter"
How about telling the yank militia not to buy drone parts from China, either directly or indirectly?
Ditto rare earth elements?
Ditto cheap & quality daily consumables from China, to help reduce raging inflation?
The Yank r realist. But u r a truly f*cked moron!