2024-01-09 15:21:11
(Washington) Are the American and Chinese economies in the process of decoupling? Trade data might suggest this as China, the United States’ leading trading partner for a decade, has been supplanted by Mexico and is seeing its market share decline.
“Decoupling” or “lowering the risk” with regard to China are themes repeated over and over once more by the government of President Joe Biden, but also by his Republican competitors, former President Donald Trump in the lead, in this general election year, during which China will most likely be the main subject of international politics.
But the reality is not necessarily so obvious, in the opinion of several specialists, who point to a more complex commercial circuits, making it more difficult to identify flows between the world’s two leading economies.
At first glance, there is no doubt: the uncoupling of the American and Chinese economies is underway. Certainly, in absolute value, imports from China have not particularly fallen, but in terms of market share the decline is significant.
“China’s market share in the United States fell from 22% in 2017 to 16% now, this is a very marked drop which brings China back to the level it was in 2007, before the global financial crisis” , underlines Caroline Freund, economist specializing in international trade at the University of California.
For her, “decoupling is underway. It is not achieved through a drop in Chinese imports, but through an increase in those from other partners, including Mexico.”
Trade data published by the American Department of Commerce highlight a more marked increase in Mexican imports, which benefits in particular from the Canada-United States-Mexico Free Trade Agreement (CUSMA).
Asian countries, Vietnam in particular, also benefit greatly from the redefinition of trans-Pacific trade.
“Mexico should be able to recover a large part of the production leaving China and has already captured part of it. But the majority of production has been relocated to Vietnam, Taiwan or South Korea,” judges former Mexican ambassador Arturo Sarukhan, who regrets the lack of economic policy from the Mexican government to attract businesses.
Main cause, estimates Henry Storey, analyst for Dragoman Global, these countries benefit from their proximity to China and can thus capture Chinese investments.
Invest to circumvent
Vietnam in particular has seen its exports to the United States soar in recent years, from $21 billion in 2012 to $136 billion in 2022, to become one of its major trading partners.
But the majority of operations that take place there are in reality the final assembly of components often coming from China.
As a sign of this rapprochement, US Treasury Secretary Janet Yellen visited the country last summer to highlight the importance of Vietnam in US supply chains without China.
Symbol of this visit, a photo of Mme Yellen on an electric scooter assembled in Vietnam, but the majority of components of which came from China, the American press discovered followingwards.
It is indeed difficult to trace the origin of products entering American soil, while assembly is most often the step which allows the famous “made in” label to be affixed. And thus to circumvent the restrictions for Chinese companies.
“Yes, China is losing market share, but if we look more broadly in reality they are still growing strongly,” adding up the country’s direct and indirect exports to the United States, according to Mr. Storey.
“Since the imposition of customs tariffs by Mr. Trump, the area that has experienced the strongest growth (in its exports to the United States) (in the world, editor’s note) is the central and western provinces of China », insists Mr. Storey.
A point echoed by Caroline Freund: “The added value of Chinese imports to the United States has fallen less than its direct imports. We receive indirect imports from China through places like Mexico or Vietnam.”
With a consequence on the South American border: so far very low, Chinese investments in Mexico are increasing very significantly, like the automobile manufacturer BYD, which is considering building a factory in the country.
“Mexico was an exception on the continent, the Chinese footprint was much weaker there than elsewhere, because the country does not export raw materials. But we are seeing an increase in Chinese investments,” underlines Mr. Sarukhan.
A development of which the American government is perfectly aware: during her visit to Mexico in early December, Janet Yellen agreed with her Mexican counterpart, Raquel Buenrostro Sanchez, to create an American-Mexican working group which will evaluate Chinese investments in the country, particularly in sectors deemed key by the United States.
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