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Successful decoupling of the United States? US expert report: impossible! Inability to reduce dependence on Chinese supply chains
Sep 02,2023
The US government has been clamoring for "decoupling" from China since 2018, but a recent report by two US economists questioned it. The report argues that the United States may ultimately fail to reduce its dependence on Chinese supply chains.
Decrease in imports to China
According to the latest data from the US Department of Commerce, in the first six months of this year, the United States imported about $203 billion of goods from China, a decrease of 25% from the same period in 2022. Mexico and Canada have replaced China as the largest suppliers of goods to the United States.
China has been the number one supplier of goods to the United States for more than a decade, and the trade relationship between the two countries peaked last year, but that relationship is now facing challenges as the United States encourages supply chain "diversification" through "nearshore outsourcing".
"Nihon Keizai Shimbun" stated that China and the United States, which account for 40% of the global economy, are divided under policy guidance, and the international trade structure is changing.
The imposition of tariffs on Chinese goods by the United States, coupled with its recently enacted industrial policy and the neo-crowning epidemic, does seem to have triggered a "great migration" of supply chain activity, with "reduced direct U.S. purchases from China".
Chinese goods have fallen from 21.6 percent of U.S. imports in 2016 to 16.5 percent in 2022. At the same time, the share of imports from low-cost regions represented by Vietnam and nearshore outsourcing regions represented by Mexico is increasing.
Does not represent a true "decoupling"
The decline in China's share of U.S. imports does not necessarily represent a true "decoupling" between China and the United States ". The report notes that while Vietnam and Mexico's exports to the United States have increased, China has also "strengthened" its trade and investment activities with Vietnam, Mexico and other countries.
Much of the trade appears to have simply been "redistributed" to third countries, and "the United States is likely to maintain indirect ties with China through trade and global value chains with these third countries".
Nearly 1/4 of Vietnam's exports are destined for the United States; for Mexico, the United States is its largest foreign market, absorbing nearly 80% of exports.
But at the same time, trade ties between Vietnam, Mexico and China are also gradually strengthening. In 1994, goods from China accounted for 9% of Vietnam's imports. In 2010, this proportion has soared to 26%, and in 2022 it will reach 40%.
The U.S. share of Vietnam's imports did grow between 2017 and 2022, but China's increase was even greater.
For Mexico, the proportion of the country's imports directly from China grew from 1% in 1994 to 15% in 2020 and 22% in 2022. In contrast, the share of Mexican imports from the United States has fallen from 69% in 1994 to 44% in 2022. Between 2017 and 2022, China is the country with the largest increase in Mexico's import share.
This trend is not limited to low-and middle-income countries. The report points out that between 2017 and 2022, China's share of the EU import market rose by nearly 2.7 percentage points, accounting for about 20.9 percent of total imports by 2022.
In contrast, the United States accounted for about 11.9 percent, a modest increase of 0.4 percentage points over the same period. Through exports to these regions, China continues to be a player in the upstream stages of the U.S. supply chain.
Economic and Trade Prospects of China and the United States
As the two largest economies, China and the United States are the two most important countries. The economic and trade cooperation between the two countries is of great significance in promoting the development and stability of the world economy.
Although there have been many trade disputes and contradictions between China and the United States in recent years, they also maintain a positive view on the future economic and trade cooperation between China and the United States.
First of all, having complementary advantages in economy and trade is an important driving force for the development of economic and trade relations between the two countries. China is the world's largest industrial production center, with abundant labor resources and low prices of production factors.
In contrast, the United States is a leading country in technology and innovation, and it is also a huge consumer market. There is a rich economic and trade complementary relationship between China and the United States, and there is a lot of room for the development of economic and trade relations between the two countries.
Second, on a global scale, China and the United States will better participate in the management of the world economy.
China and the United States are the world's largest economies and the most important countries in the world. China and the United States realize that in the face of common problems in the world, they can only be dealt with through cooperation and consultation.
Although there are still some differences and confrontations between China and the United States, the two countries should further develop more cooperation and communication under the current worldwide economic situation.
We must adhere to the world's largest free and multilateral trade system and promote the opening up and development of all countries in the world.
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