China’s exports to US endure steepest plunge in nearly 30 years

China’s exports to US endure steepest plunge in nearly 30 years

China’s exports to US endure steepest plunge in nearly 30 years

Still, analysts said, the dramatic drop – partly due to a high base in 2022 when US importers front-loaded inventory amid Covid-19 supply chain disruptions – does not prove a real reduction in the US reliance on “Made in China”.

Rather, they contended, it indicates a lengthening of the global supply chains, in which China remains an important part.

According to US data, China is also set to lose its position as the top exporter to the US for the first time in 17 years.

From January to November in 2023, total US imports for consumption – those have physically cleared customs – from China were US$388 billion, outpaced by Mexico and even Canada, according to the US International Trade Commission.

China’s share of US imports also fell to 13.7 per cent in the first 11 months of 2023, its lowest level since 2004, based on South China Morning Post calculations of the data. That share peaked at 21.6 per cent in 2017, before the trade war began; it was 16.3 per cent for 2022.

Geopolitical frictions between the world’s two largest economies, along with the tariffs that have been in place since the Donald Trump administration, are key factors behind the decline, said Steven Altman, senior research scholar and director of the DHL Initiative on Globalization at the New York University Stern School of Business.

Washington has stepped up efforts on “derisking” its supply chains since the end of the Covid-19 pandemic. US multinational corporations have also been hedging their bets by adopting a “China plus one” strategy, which seeks diversification for manufacturers by reducing reliance on China as a production base.

“It is important to note that the share of the rest of the world’s imports coming from China has remained pretty steady while the share of US imports coming from China plummeted. That indicates that the decline was due primarily to US-China tensions, not a general drop in China’s competitiveness as an exporting country,” Altman said.

Still, experts said, direct trade flow fails to tell the developing complexity of supply chains, as more components made in China take detours via Southeast Asia and Mexico – where final products are assembled – before arriving in the US, making it hard to track in detail.

What it looks like we’re seeing is an elongation of supply chains, rather than a successful effort to push China out of global production networks

Nick Marro, Economist Intelligence Unit

“The boom in foreign investment in Mexico, and other emerging markets in South-east Asia and Latin America, suggests that these Chinese exports are also responding to the establishment of new supply chains further afield,” said Nick Marro, the lead analyst for global trade at the Economist Intelligence Unit.

And these non-China supply chains are still heavy consumers of Chinese raw materials, intermediate inputs and capital goods, he said.

“As a result, what it looks like we’re seeing is an elongation of supply chains, rather than a successful effort to push China out of global production networks,” Marro said.

“For as long as China remains a cost-competitive place to do business – assisted by its vast and sophisticated production and logistics networks, which in turn reflect significant government support over the past few decades for the Chinese export machine – the country will remain an important part of the global trade landscape, including in regards to US importers,” he added.

Particularly affected by the passage of the Uygur Forced Labor Prevention Act, China accounted for 21 per cent of US apparel imports in the first 11 months of 2023, marking a new low for the past decade, according to Sheng Lu, associate professor at the University of Delaware’s department of fashion and apparel studies.

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The US law, which went into effect in June 2022, effectively bans imports of products with any input from China’s far-west Xinjiang region, which produces 80 per cent of the cotton in the country.

Even though fewer finished garments are coming from China, US fashion companies say that China will continue to play a critical role as a textile raw material supplier since no immediate practical alternatives are available, Lu said.

“In other words, because textile manufacturing relies heavily on capital and technology, building textile production capacity outside China will be considerably longer and more challenging than finished garments,” he said.

Still, he added, 2024 could pose greater challenges for China’s textile and apparel exporters to the US market, as Congress considers banning the “de minimis” trade rule – which allows companies to ship packages worth less than US$800 into the US without paying duties and fees – from applying to Chinese companies. Such a move, Lu noted, would especially affect Chinese e-commerce businesses.

“The election-year politics could also bring new political instability to bilateral trade relations,” Lu said.

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