I was going to focus this morning on the new U.S. official productivity data but then came across a chart about U.S.-China trade flows that was so ditzy that the data it portrayed completely belied a crucial part of the headline. So the productivity analysis will have to wait a bit.
Here’s the chart, including the subtitle,”Despite heated rhetoric, trade with China shows no signs of slowing down,” which appeared in this version of a new Bloomberg report:
But unless I’ve suddenly developed real vision problems, it’s clear that that’s exactly what the chart shows since 2014 as compared to the years before. Here’s the actual data on annual changes in the value of bilateral goods exports and imports courtesy of the same U.S. Census Bureau figures on which the Bloomberg reporters in question based their conclusion:
Between 2014 and 2021, two-way Sino-American goods trade added up to $656.38 billion. Since 2014, it rose by 10.85 percent.
Between 2007 and 2014, this total rose by 77.08 percent. That’s not a slowdown – and a big one?
Yes, the Bloomberg chart only goes through November, 2022 (the latest data available). But two-way U.S.-China trade advanced by just 7.75 percent between the first eleven months of 2021 and the first eleven months of last year, so December’s results won’t make much of a difference.
Has the CCP Virus distorted the picture? Of course it’s affected the trade flows by significantly slowing the economies of both countries. But the 2007-2008 global financial crisis and ensuing Great Recession made a big difference, too. And although its impact on China’s economy didn’t remotely match the impact on America, the U.S. economy’s long recovery from that major slump was the weakest from a recession on record. And still bilateral goods trade (especially goods imports from China) surged.
Would counting services trade make a difference? No. Comparing changes in these sectors with those in goods sectors is complicated by the lag with which such exports and imports are reported officially. In fact, the latest numbers I could find go only through 2021. But as made clear by those 2021 figures supplied by the Congressional Research Service ($61.0 billion), and numbers from the U.S. Trade Representative’s office for the final pre-pandemic year 2019 ($76.7 billion), they’re far too small to change the trends notably.
It’s also crucial to observe that the headline claim about U.S.-China trade breaking records is fatally flawed, too. For it omits vital context. Sure, in absolute terms, this commerce is at an all-time high. But much more important, as a share of the U.S. economy? Not even close. In 2021, combined Sino-American goods imports and exports came to 2.82 percent of total U.S. output. In 2014, just to use one comparison, this number was 3.37 percent.
The big question raised by these discrepancies between the Bloomberg reporters’ claims and the facts is “Why were they ignored?” I’m not a mind-reader, but here’s my hunch: They stemmed from a desire – maybe witting, maybe not – to reinforce the economics and trade establishment tropes that (a) international trade is driven overwhelmingly by market forces; (b) that there’s nothing constructive or even significant governments can do (e.g., impose tariffs or tech controls) to intervene over any meaningful length of time; and (c) that because China’s become such an economic juggernaut (even with its current struggles) bilateral trade is nothing less than a force of nature that’s simply unstoppable in the larger scheme of things.
None of these contentions is crazy on its face. For example, as the pandemic has ironically demonstrated, literal forces of nature can play a huge role in impacting trade flows and their interpretation. (Unless the CCP Virus was produced by gain-of-function research?) So can non-policy-related influences like the Laws of Small and Large numbers, which tell us that big percentage changes are easier to generate from modest starting points than from less modest starting points.
But as of now, by the main measures, a major slowdown in U.S.-China trade unquestionably has taken place, and the possible policy implications shouldn’t be overlooked: Since the erroneous conventional wisdom strongly supported the hands-off approach taken by pre-Trump administrations, this loss of momentum looks very much like an endorsement of the hands-on strategy pursued since.