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(What's Left of) Our Economy, China, exports, Made in Washington trade flows, manufacturing, New York Fed, tariffs, Trade, trade war, Trump
If you were writing an economics blog item for a major government institution in America, and your subject was a trend that for two years now has been a major controversy in America, wouldn’t you include information on how that trend actually was affecting America?
Not apparently if you’re Hunter L. Clark, and you work for the New York branch of the Federal Reserve system – which hasn’t exactly been shy about weighing in on this controversy (President Trump’s tariffs on China) before (See, e.g., here and here.) Even more unusual: that previous New York Fed contribution to the trade war debate had emphatically concluded that the President’s policies have been an abject failure. Had this new item presented U.S.-relevant data, the clear conclusion would have been that the trade war has succeeded in at least one crucial respect.
Specifically, in a post last Friday, Clark wrote on how China’s export performance so far this year has been “supercharged” by the CCP Virus pandemic (which of course originated in one of its major cities).
Clark also noted various (convincing) reasons that this surge might be temporary, and even observed that some other counties had actually out-performed China export-wise. But China’s exports to the United States – which of course the tariffs (along with the rest of the President’s trade policies) aimed to curb and ultimately reduce) – went completely unmentioned. And that’s an awfully odd omission because combining Clark’s figures with readily available U.S. Census data shows that this wave of China export increases completely missed the United States.
According to Clark, compared with the same quarters last year, China’s overall goods exports this year “slightly increased in the second quarter and are currently forecast to grow by close to 6 percent in the third and fourth quarters of this year.” He italicized “increased” because forecasts generally expected a ten percent decline in Chinese overseas sales during these periods.
But despite that slight increase in China’s global merchandise exports between the second quarter of 2019 and the second quarter of 2020, during that year, official U.S. data show that these exports to the United States fell by 6.67 percent. And in contrast to the six percent improvement in China’s worldwide exports between the third quarter of 2019 and the third quarter of this year, its exports to the United States were down by 2.98 percent.
Also relevant to the trade war debate – did the Trump tariffs simply result in shifting the makeup of U.S. imports from China to other countries, therefore accomplishing nothing (at best) economically for the nation according to one of the Trump’s (and Trumpers’) favorite scorecards? Clark more reasonably doesn’t investigate this question, but the official American data make the Trump record look awfully good according to this standard, too.
As known by RealityChek regulars, the best global proxy for U.S.-China goods trade is U.S. non-oil China goods trade, and that’s especially true on the import side, since the United States buys no oil from China. And the numbers for this “Made in Washington” import flow (so named because commerce in these goods is strongly influenced by government trade policy) make clear that, whatever import shifting has taken place hasn’t prevented overall U.S. purchases of these foreign products from falling also.
Between the second quarter of 2019 and the second quarter of 2020, they fell by a whopping 18.92 percent. Since the U.S. September trade figures won’t be out until early next month, full third quarter results aren’t yet available. But on a July-August basis, these global Made in Washington imports were off by 2.13 percent.
These subjects, moreover, clearly are of more than academic or political score-settling interest. Despite facing the same CCP Virus-induced disruptions as the rest of the economy, domestic manufacturing – which is heavily exposed to Chinese and other foreign competition – has held up well. In inflation-adjusted terms, it’s production from its February peak through September is down just over six percent. Employment has been relatively resilient, too, along with capital spending.
Imagine how much worse its troubles would have been if it experienced the kind of Chinese export flood that’s washed over other economies. Indeed, this counter-factual seems eminently worthy of study. Including by the New York Fed.
