NEW YORK: China and the United States are shipping goods to each other at the briskest pace in years, making the world’s largest bilateral trade relationship look as if the protracted tariff war and Covid-19 pandemic never happened.
Eighteen months after the Trump administration signed the trade deal, the agreement has turned out to be a truce at best. The US trade deficit hasn’t shrunk, most levies are still in place, and it hasn’t led to negotiations over other economic issues.
And yet, bilateral trade in goods is an area of stability in a relationship that has otherwise continued to deteriorate, with rising tension over Hong Kong, Taiwan, human rights, the origins of the Covid-19 pandemic, accusations of computer hacking and many other flashpoints.
Monthly two-way trade, which tumbled to US$19bil (RM80.3bil) in February of last year amid shutdowns in Chinese factories, rebounded over the past year to new records, according to official Chinese data. And that boom looks set to continue, with China purchasing millions of tonnes of US farm goods for this year and next and stuck-at-home US consumers still shopping and importing in record amounts.
While the US government’s numbers differ somewhat, the bustling trade has defied all expectations that the tariffs on hundreds of billions of dollars worth of merchandise would force a decoupling of supply chains.
Instead, both sides have learned to live with the taxes, with Chinese firms buying more to fulfill the terms of the 2020 trade deal, and US companies purchasing goods they can’t get elsewhere to meet elevated household demand fuelled in part by trillions of dollars in government stimulus.
“We’ve seen the strong consumer demand that’s been occurring throughout the pandemic, and we’ve seen the import levels just go through the roof,” said Jonathan Gold, vice- president of supply-chains and customs policy at the National Retail Federation, which represents vendors from mom-and-pop stores through the big-box chain behemoths.
“That’s a strong sign that the economy continues to recover.”
Exports from South Korea and Taiwan to the United States have also risen over the same period, underscoring the strength of US demand despite one of the worst outbreaks of Covid-19 of any nation.
Almost half of the cargo moving in and out of Los Angeles port – the United States’s biggest – involves China and Hong Kong.
US demand for goods continues unabated, with record inbound shipments to the port in May as companies start to restock ahead of the Christmas shopping season.
“All signs point to a robust second half of the year,” Los Angeles port executive director Gene Seroka said during a recent press briefing, noting that fall fashion, back-to-school, Halloween and holiday goods were already arriving on the docks.
With tariffs in place on billions in imports from China, from footwear and clothing to electronics and bicycles and even pet food, many US retailers are choosing to absorb the cost and squeezing their profit margins, the NRF’s Gold said. Some are passing these along to consumers.
Firms also are dealing with backlogs and bottlenecks at US ports and increased shipping costs.
“Between the cost of the tariffs and the increased cost of transportation that we’re seeing, that’s having an impact on companies’ bottom line,” Gold said.
“They’ve seen significant cost increases as a result of both the trade war and the transportation crisis we’re facing.”
The Biden administration hasn’t said whether it plans to continue with the deal and is reviewing US policy toward China, but with US Trade Representative Katherine Tai calling the trade relationship “unbalanced” and Treasury Secretary Janet Yellen saying the deal didn’t address the fundamental problems with China, the outlook is unfavourable. — Bloomberg