America’s $13 Billion Loss In The Latest Trade Battle With China — Panjiva
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America’s $13 Billion Loss In The Latest Trade Battle With China

Ags - Grains/Beans 162 China 1758 Industrials - Capital Goods 265 Tariffs 1169 Trade Balance 657 U.S. 3297

The surge in the U.S. trade deficit continued unabated in October with an 18.1% rise on a year earlier resulting in a $55.5 billion goods-and-services deficit. That was the highest since Oct. 2008, Panjiva analysis of official data shows, and was largely the result of a 14.1% rise in the goods deficit as outlined in Panjiva research of Nov. 28.

GOODS IMPORTS CONTINUE TO DRIVE THE TRADE DEFICIT HIGHER

Chart segments U.S. trade deficit by direction of trade and category. Calculations based on U.S. Census Bureau data.  Source: Panjiva

The data will likely worsen relations with both the EU and China. In the case of the EU, where trade deal negotiations are scheduled to start in the new year, there was a 28.4% rise in the deficit to reach a record high. With regards to China there was a 22.3% surge vs. a year earlier to reach a record $43.1 billion, or 48.2% of the entire trade-in-goods deficit.

U.S. DEFICIT WITH CHINA HEADING THE “WRONG” WAY

Chart segments U.S. trade-in-goods deficit by country. Calculations based on U.S. Census Bureau data.  Source: Panjiva

The data shows in a very tangible way that the U.S. is “losing” the trade war with China on the basis of the Trump administration’s key trade metric. In aggregate U.S. exports to China fell 29.6% on a year earlier to the lowest for a single month since July 2016 and was the worst month of October since 2009. The drivers of that decline were however similar to a month earlier with exports of soybeans, energy and cars – which were subject to 25% duties since July – fell close to zero.

Meanwhile U.S. imports from China climbed 8.8% on a year earlier. The latter likely reflects an acceleration of imports ahead of the risk of an increase to 25% from 10% of duties on around $200 billion of imports from China. That can be seen in a 15.5% rise in imports of those products in October vs. a year earlier after a 20.7% surge in September.

The recent agreement between President Donald Trump and President Xi Jinping to suspend that increase may lead to a slowdown in shipments in December, though Panjiva’s preliminary seaborne import data in November shows a modest increase vs. a year earlier still.

TARIFFS NOT DELIVERING THE DESIRED EFFECT FOR AMERICA YET

Chart segments U.S. trade-in-goods with China by direction on a monthly and three-month average basis. Calculations based on U.S. Census Bureau data.  Source: Panjiva

Looking specifically at products afflicted by tariffs on both sides shows China’s focus on commodities – where pricing is more important – has proven more effective in cutting imports compared to the U.S. focus on industrial supply chain components where switching supplies is more complex.

Panjiva analysis shows Chinese imports of list one and two products where 25% tariffs have been applied since August have now fallen by 68.0% in the three months to Oct. 31 vs. a year earlier while list three products (10% from September) increased modestly by 2.3%.

By contrast U.S. imports of list one and two have fallen by 13.2% but list three has risen by 13.5%. In dollar terms that means China imports of U.S. products have fallen by $8.26 billion in the past three months on a year earlier while U.S. imports from China have increased by $5.09 billion making for a net $13.35 billion swing.

CHINA’S RETALIATION PROVING MORE EFFECTIVE THAN U.S. TARIFFS SO FAR

Chart compares U.S. and Chinese imports of products covered by tariffs in July and August (list one and two) and those applied in September (list three).  Source: Panjiva

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