Sunday, May 22, 2022

US-China trade conflict effects


Zubair Yaqoob
The author has diversified experience in investigative journalism. He is Chief content editor at

US-Chinese has been weighing on the stock markets since they entered a hotter phase last year. Mutual sanctions give rise to fears for trade between the two major economies, and thus for the growth of the global economy. Because if welfare gains from the trade fail, this is also reflected in a lower growth, which is not limited to the two countries. The US President Donald Trump, who in his inimitably simplistic manner coined the phrase “trade wars are good and easy to win.”

The question is, of course, If one looks at the current trade figures from China, many observers may doubt it. In February, China’s exports to the Americas were almost 30 percent lower than in the same month last year, having already been slightly lower in the previous two months than a year ago. At the same time, the trade balance improved sharply in favor of the United States in February, dropping to $ 14.7 billion, its lowest level in nearly two years.

But to conclude that it would be a success of Trump’s policy, would be a bit short-sighted. Because the beginning of the year brings with regularity a significant decline in Chinese exports. This is not only due to the lower number of calendar days, but also to the Chinese New Year week, which significantly reduces the number of working days. This year, this effect may have been particularly noticeable. The decline in exports to Europe was significantly stronger than in the previous two years.

However, what has changed strikingly is American exports. Since November 2018, their volume has declined compared to the same month of the previous year with clear double-digit rates. During the same period, however, EU exports to China continued to increase.

On the other hand, a similar picture emerges. China’s imports from the United States declined, though not to a lesser extent until January, while exports to the EU increased rather than declined.

What can be held, this is as an interim balance of the trade conflict: It is questionable whether the Trump administration has ever managed to make the trade “fairer” – which is measured in the end, that the trade deficit is sinking, but what again, in part only has something to do with “fairness”. The decline in the deficit could have seasonal reasons.

The trade volume between the United States and China has fallen to the lowest level in seven years. The seasonal effects are likely to recover, but January had already reached its lowest level in three years, and December in four years – the downward trend is unmistakable.

By contrast, trade with the EU fell slightly in February compared to 2018, but still reached the second highest level in February. January had still brought a record volume.

So, it turns out that so far, the United States has renounced welfare gains from international trade in favor of a dubious, better distribution, which the EU seems to be profiting from. This can also interpret Trump’s trade policy attacks on the EU in a different way.

In any case, this is not good news for the stock markets, as the cumulative volume of trade between China and the EU, as well as China and the United States, tends to be somewhat weaker. The intensification of the trade conflict could be even more pronounced. Moreover, in view of the weakness of China and the forecasts of the European Central Bank on Thursday, economic growth is unlikely to be expected for the future.

Chinese economy is starting to face a problem that has caused the socialist planned economies of Eastern Europe to face much faster due to their small size in their time: demographic trends mean that there is no longer any possibility of further transferring agricultural workers to industry. But this eliminates a source of growth, which until then could mask an innovation weakness.


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