Well, this took longer than I expected. When I put up my post on the latest official U.S. monthly trade figures (for May), I noted that American goods imports from China kept growing robustly despite the CCP Virus-induced downturn of the overall U.S. economy and the stiff Trump tariffs remaining on the overwhelming share of products Americans buy from China.
As I observed, these results begged the question of what the heck was being bought, and I promised to provide the answer as soon as possible. But it wasn’t until yesterday that I found online the detailed U.S. International Trade Commission (USITC) I needed to keep my word.
Three important conclusions can be drawn. First, the big increases in these merchandise imports from China are highly concentrated in a handful of industries. Second, there’s a strong case to be made that tariffs really can affect import flows when they’re high enough. And third, largely as a result, the biggest U.S. corporate beneficiary by far has been Apple Inc.
To review, the overall data, between January of this year and May, U.S. goods imports from China have risen by 9.97 percent. Given that America’s total non-oil imports (the best global comparison with imports from China) fell by 14.48 percent during that period, that’s stunning enough.
It’s true that merchandise imports from China itself were still 20.11 percent lower during the first five of this year than during the comparable period last year. That’s nearly twice as much as the 10.35 percent decrease in all U.S. non-oil imports, so it’s not like China is still laughing all the way to the bank due to its sales to the United States. But that increase from January through May this year is still puzzling.
Less puzzling – but still puzzling – is the huge disparity between China import numbers from February (when they bottomed) through May, and those for U.S. non-oil imports as a whole. The former jumped 60.43 percent, while the latter fell by 12.09 percent.
After all, the 31.45 percent drop in U.S. goods imports from China between January and February (when Beijing shut down most of its economy in order to containt the virus) was much greater than the 2.72 percent decrease that month for all America’s non-oil imports. At the same time, products made in the rest of the world didn’t face the kinds of Trump tariffs imposed on most goods from China.
Since the CCP Virus is still (deeply) depressing the U.S. economy while China’s recovery (including its export-heavy industries) seems well underway, it will be months at best until it will be possible to see normal bilateral trade flows again.
What does come through loud and clear, though, is the dominance of just a few sectors in these trade flow shifts. In January, for example, the top four categories of U.S. purchases from China (according to the U.S. government’s North American Industry Classification System) were (in descending order) computers; broadcast and wireless communications equipment (the grouping that include cell phones); miscellaneous textile products; miscellaneous plastics products. They made up a hefty share of the total of $33.281 billion worth of goods Americans bought from China that month – just under 24 percent.
But in February, when the Chinese shutdown took hold and U.S. goods imports from the People’s Republic crash dove by 31.45 percent – to $22.813 billion – the four aforementioned goods categories accounted for nearly 34 percent of the decrease.
February saw the start of that powerful four-month, 60.43 percent leap in total U.S. merchandise imports from China. The top fours share of that bounceback? Fully 63.57 percent. That was more than three times their share of total February U.S. imports from China.
For now, Apple and the tariff treatment of its products go far toward explaining what resilience China’s sales to the United States have shown. The evidence is found in the data from three categories of imports from China – computers, broadcast and wireless communications equipment, and computer parts (which happen to be the fifth biggest category of U.S. goods imports from China). Apple’s monster-selling Chinese-made products of course figure prominently in all these groupings.
The widespread China shutdown – including of all Apple-related factories – was clearly responsible for U.S. imports of these products sinking by 47.79 percent. This nosedive was steeper than that for U.S. imports from all goods from China, and of course steeper than that for total U.S. non-oil goods imports. But the February-through-May comeback staged by these goods was epic – just short of 156 percent. As a result, whereas U.S. imports of all merchandise from China in May were up over the January total by the 9.97 percent mentioned above, for the three electronics-related categories combined, they were more than a third higher.
Just as interesting: although on a January-May basis, all U.S. goods imports are down this year so far by the 20.11 percent mentioned above, for the three electronics categories, they’re off by somewhat less – 16.06 percent.
And what do tariffs have to do with all this? Lots. Because lots of Apple’s Chinese-made final products, and Chinese-made parts and components for the Apple products that are assembled in the United States have been exempted from tariffs altogether.
In other words, if you’re interested in figuring out whether tariffs work, it’s important not only to know what happens to imports when they’re present, but also when they’re not allowed to work at all.