U.S. China trade climbs higher than a balloon
U.S.-China relations have hit a new low after a Chinese spy balloon was found drifting high over the United States and eventually shot down using a 5th Generation Lockheed Martin F-22 Raptor firing a Sidewinder missile in a dramatic display of U.S. military might.
But new figures for the two biggest global economies show that trade has never been better as record-breaking numbers are announced. According to the U.S. Commerce Department, trade between the United States and China reached an all-time high of $690 billion in 2022.
China was not the only country to experience increased activity, with the U.S. seeing record imports from ninety countries, particularly from close neighbors Mexico and Canada, as well as Japan.
While some of the increases in trade resulted from historic inflation levels, the statistics are still astonishing, especially considering the ongoing U.S. tariff campaign on imports from China coupled with new moves to stem the flow of U.S. tech to Beijing. Moreover, these figures show how entangled U.S. and China trade is, despite efforts to try and uncouple their economies.
After years of progressively more imports from China, in 2018, former President Trump initiated a trade war that brought about tariffs on over $300 billion worth of Chinese imports. The move was initially sparked by concerns about Chinese trade practices that made American companies hand over precious intellectual property.
China retaliated with tariffs on around $100 billion of U.S. products. Almost all of the duties imposed in 2018 by both sides are still in effect two years into the new administration.
The United States justified some initial trade tariffs with national security concerns. Biden still uses this reasoning, especially concerning the export controls designed to keep the most sensitive and advanced U.S. technology from being accessed by the Chinese PLA.
That concern is heightened by President Xi continuing his threat to reclaim Taiwan, a multi-party democracy with democratically elected presidents since 1996. Taking back Taiwan would help the Chinese dominate the region militarily and control the world computer chip market. Taiwan dominates that market with the world's leading advanced chip producer, Taiwan Semiconductor Manufacturing Company.
Still, despite talk of uncoupling, U.S. imports from China increased to $539 billion last year, only slightly below the record set in 2018, with a record $155 billion of goods exported to China. The difference between exports and imports with China of $384 billion is the second-highest bilateral trade deficit ever.
A large percentage of the U.S. exports to China consisted of agricultural goods, putting farmers in the firing line of any efforts to cut or curtail trade relations.,
Further uncoupling seems unlikely at the moment, despite the current diplomatic row over the Chinese spy balloon that flew over U.S. territory and Nancy Pelosi's August trip to Taiwan straining relations.
A recent report predicted that trade between the U.S. and China will decrease by $65 billion, or around 10 percent, by 2031, as companies look to diversify supply chains and move production to less geopolitically uncertain countries such as Mexico, India, and countries in Southeast Asia such as Vietnam.
Instead of leaving China altogether, many companies and countries are building a China-plus-one strategy to give themselves more options. Vietnam has significantly benefited as U.S. companies look to reduce their reliance on Chinese supply chains.
Bilateral trade between the U.S. and Vietnam has increased threefold over the past decade, hitting a record $128 billion last year. However, most of that growth has been imports from Vietnam as companies have transferred some of their production away from China, leading to a record U.S. trade deficit with Vietnam of $116.1 billion. U.S. trade with other countries also reached new highs last year, despite increased protectionism.
Last year's figures also include record imports of $554 billion from the E.U., which has protested about new U.S. clean energy and technology subsidies that they believe will limit their sales to the U.S. and cause a loss of European investment.
One notable exception to increased trade was Russia, which the U.S. and its allies sanctioned after the Ukraine invasion in early 2022. As a result, bilateral U.S.-Russia trade was down by more than fifty percent from 2021 levels, with both imports and exports sharply down.