Last week, RealityChek analyzed in great industry-by-industry detail new government data illuminating U.S. trade trends for the first half of this year. This week, we’ll see how leading sectors of the American economy have fared versus Chinese competition during that period, and how it compares with their performance during the first half of last year. And we’ll also examine how America’s China trade in these respects compare with the nation’s global trade performance.
As with the global trade data presented last week, the industry categories used are those of the most granular level of the North American Industry Classification System (NAICS), the federal government’s main system for slicing and dicing industry-specific economic data. I like this six-digit level because it draws the greatest number of distinctions between final manufactured products and the parts and components of these products. This distinction is critical because the rapid growth in recent decades of global supply chains (i.e., the rapid growth of American production offshoring) means that a large percentage of U.S. and global trade consists of trade in these manufacturing inputs.
Two other technical notes: First, because trade data for major aerospace products aren’t made public in order to protect corporate information considered proprietary, the six-digit NAICS results in this sector are unreliable, and the five-digit level data are being used. Second, because the release of services trade data lags considerably, these RealityChek reports cover only goods trade (which still comprises the vast majority of U.S. trade flows).
Let’s start with a list of the nation’s top ten goods exports to China for the first half of this year, and how their performance has changed in dollar terms since the first half of 2016:
1. Aerospace: -10.7 percent
2. Autos & light trucks: +26.0 percent
3. Soybeans: +30.6 percent
4. Waste & scrap: +19.2 percent
5. Semiconductors & related devices: -2.7 percent
6. Crude oil & natural gas: +3,250.2 %
7. Plastics materials & resins: +32.3%
8. Semiconductor production machinery: +7.1 percent
9. Pharmaceuticals: +45.2 percent
10. Miscellaneous basic organic chems: +15.7 %
And here’s the list of America’s top ten worldwide goods exports, and how these levels have changed since the first half of 2016:
1. Aerospace: -4.0 percent
2. Petroleum refinery products: +26.1 percent
3. Autos & light trucks: -8.5 percent
4. Special classification provisions: +9.7 percent
5. Semiconductors & related devices: +4.7 percent
6. Miscellaneous auto parts: +1.4 percent
7. Miscellaneous basic organic chemicals: +3.7 percent
8. Pharmaceuticals: +3.9 percent
9. Plastics materials & resins: +6.3 percent
10. Primary smelted non-ferrous metals: +54.0 percent
Both lists contain mainly advanced manufactured products, which is good for the U.S. economy because these sectors are great performers in terms of high wage job creation, innovation, and (historically, anyway) productivity growth. But some important differences between the lists can be seen, too. For example, the year-to-date swings in the China trade flows generally are much greater – both where American exports have risen and where they’ve fallen.
And then there’s the rocket ride taken by American crude oil and gas exports to China. These shipments alone accounted for more than 22 percent of the period’s increase in total U.S. goods exports to China. But how can that pace possibly continue?
Also noteworthy: The big increase in American car and light truck exports to China. Given the PRC’s ambitious plans to become a major automotive production power, (though one whose own output is still dominated by foreign- brand products) how much longer will Beijing remain content to import so many vehicles from abroad?
Speaking of imports, here’s the list of the top ten U.S. goods purchases from China and how they’ve changed between January-to-June, 2016 and January-to-June this year:
1. Broadcast & wireless comm: +26.4%
2. Computers: +7.9 percent
3. Telecomms equipment: +18.2 percent
4. Computer parts: -19.2 percent
5. Games, toys, childrens’ vehicles: +7.1%
6. Printed circuit assemblies: +50.0 percent
7. Audio & video equipment: -15.0 percent
8. Miscellaneous plastics products: +7.1%
9. Institutional furniture: +8.5 percent
10. Metal household furniture: +10.3 percent
And for comparison’s sake, here’s the corresponding list of America’s leading global goods imports:
1. Autos & light trucks: +4.5 percent
2. Crude oil & natural gas: +53.7 percent
3. Pharmaceuticals: +2.3 percent
4. Goods returned from Canada: +4.3 percent
5. Broadcast & wireless communications equipment: +10.3 percent
6. Computers: +6.2 percent
7. Telecomms equip: +8.2 percent
8. Aerospace products: -3.4 percent
9. Petroleum refinery products: +22.2 percent
10. Semiconductors & related devices: -6.4 percent
Unlike the global imports list, the China imports list is entirely comprised of manufactured goods. But they’re hardly all high-value manufactures. Indeed, four of the ten categories consist of relatively simple consumer goods, and three more fall into the consumer electronics area (including that leading broadcast and wireless communications sector, which contains smartphones). The only entry that qualifies as capital- and technology-intensive is telecomms equipment (although the Chinese content of consumer electronics products, and indeed of China’s exports generally, is rising strongly by all accounts).
As with U.S. worldwide trade, however, the big test of America’s competitiveness in China trade consists of the trade balance figures. For mainstream trade theory teaches that products that countries trade most successfully will turn out to be products that countries make most successfully.
So here are the U.S. goods categories running the biggest trade surpluses with China, and how these surpluses have changed between the first six months of last year and the first six months of this year:
1. Aerospace products: -11.58 percent
2. Autos & light trucks: +14.46 percent
3. Waste & scrap: +17.92 percent
4. Crude oil & nat gas: +3,228.07%
5. Plastics materials & resins: +29.94%
6. Semiconductor production machinery: -1.91%
7. Liquid natural gas: +66.25 percent
8. Sawmill products: +24.96 percent
9. Non-poultry meat products: +2.83%
10. Pulp mill products: +6.09 percent
If you agree that advanced manufacturing’s fortunes are central to the U.S. economy’s fortunes, this list is only mildly encouraging, at very best. Yes, the top two categories merit that label, along with plastics materials and resins and semiconductor machinery. But two of those surpluses have shrunk over the past year. And all the other categories are commodities or low-value products. They’re also the categories that saw the greatest trade surplus improvements.
Here are the biggest surplus sectors in America’s worldwide trade:
1. Aerospace products: -2.03 percent
2. Petroleum refinery products: +33.11 percent
3. Plastics materials & resins: +4.73 percent
4. Soybeans: +28.21 percent
5. Other special classification provns: +7.13 percent
6. Corn: +20.26 percent
7. Waste & scrap: -7.82 percent
8. Liquid natural gas: +56.54 percent
9. Semiconductor production machinery: +64.73 percent
10. Non-anthracite coal & natural gases: +223.22 percent
Interestingly, this global list is even more low-value and commodity-heavy than the list of the biggest bilateral China deficit categories. Moreover, here, too, it’s mainly the commodity and lower value products that have seen the biggest improvements in these surpluses.
Finally, let’s examine the biggest deficit categories in America’s trade with China, and how they compare with the global results. First, the China figures and how they’ve changed on a year-to-date basis:
1. Broadcast & wireless communications equipment: +29.14%
2. Computers: +7.56 percent
3. Telecomms equipment: +19.46 percent
4. Computer parts: -20.75 percent
5. Games, toys, children’s vehicles: +7.05%
6. Printed circuit assemblies: +49.77%
7. Audio & video equipment: -15.52%
8. Miscellaneous plastic products: +6.88%
9. Institutional furniture: +8.61 percent
10. Metal household furniture: +10.28%
The biggest total U.S. goods trade deficit categories and their similar increases and decreases?
1. Autos & light trucks: +10.64 percent
2. Crude oil & natural gas: +45.31 percent
3. Goods returned from Canada: +4.25 percent
4. Computers: +1.16 percent
5. Broadcast & wireless communications equipment.: +11.06 percent
6. Telecomms equipment: +19.10 percent
7. Printed circuit assemblies: +47.12 percent
8. Audio & video equipment: -11.50 percent
9. Institutional furniture: +8.56 percent
10. Iron & steel: +76.28 percent
On the value-added scale, the two sets of figures look pretty comparable. But here’s something revealing: Six of the categories appear on both lists, which certainly squares with the idea that the U.S. trade deficit problem is largely a China trade deficit problem. Something else revealing: Tariffs work. Just look at how important iron and steel are on the worldwide deficit list, but don’t even appear on the China deficit. That’s largely because of the steep punitive duties slapped on Chinese steel starting in 2015.
Next up: Which major sectors of America’s goods economy have seen the biggest year-to-date improvement and deterioration on the China goods front, and what do those figures augur for the nation’s economic, industrial, and technological future?