U.S. Trade with China, World Continues Sinking

One month after showing signs of bottoming, trade between the U.S. and China plunged in November 2023.

The combined value of goods traded between the U.S. and China sank to $49.4 billion in November, nearly 14% below their level in October 2023. That’s much larger than the typical seasonal drop that occurs between October and November each year, as October typically represents the peak for U.S. exports. Powered by exports of U.S. agricultural goods, primarily soybeans, the months of October and November often represent the top two export months for the U.S. economy.

Consequently, the trailing twelve month average of the combined value of exports and imports between the U.S. and China continued falling in November 2023. The following chart shows these developments.

With the continued decline in U.S.-China trade, the gap between the trailing twelve month average of the combined value of goods exchanged between the two nations and a counterfactual based on how trade between the countries recovered after the 2008-09 recession grew to $14.5 billion.

The cumulative loss of trade recorded since September 2022 between the U.S. and China rose to $111.5 billion in November 2023. Much of this loss is a consequence of the implementation of the Biden administration’s trade restrictions on the export of semiconductor chips on 7 October 2022.

Trade between the U.S. and the rest of the world did not fare much better. Trade between the U.S. and the rest of the world has been shrinking since Febrary 2023 as a result of President Biden’s trade policies. The next chart reveals those gaps has grown:

Through November 2023, the trailing twelve month average of the total value of goods traded between the U.S. and every other nation in the world except China (shown in the chart in light blue) is $28.6 billion less that would be expected had the level of trade continued growing at the pace it did between October 2022 and February 2023. The cumulative loss of trade between the U.S. and the rest of the world since February 2023 is over $155 billion.

Eight months after we first reported negative trends for the United States’ trade with the rest of the world, the declines are getting too big to go unnoticed in general media reporting. Here’s Reuters, whose report quickly finds the gathering clouds for the U.S. economy:

The U.S. trade deficit unexpectedly narrowed in November as imports of consumer goods fell to a one-year low amid slowing domestic demand, a trend that, if it persists in December, could result in trade having no impact on economic growth in the fourth quarter.

The report from the Commerce Department on Tuesday also showed exports declined in November amid cooling demand overseas. Demand is slowing both in the United States and abroad following hefty interest rate increases by global central banks since 2022 to tackle rampant inflation….

Before the data, most economists were expecting that trade would exert a small drag on gross domestic product in the fourth quarter after it was neutral to the economy’s 4.9% growth rate in the July-September quarter. Trade has not contributed to GDP growth for two straight quarters….

The drop in imports is in line with businesses throttling back on inventory accumulation in anticipation of slower demand this year following 525 basis points worth of interest rate hikes by the Fed since March 2022.

The article doesn’t mention the role President Biden’s trade policies have had in contributing to the overall decline in trade. It does however note the disruption of cargo ships moving through the Red Sea had little-to-no impact on U.S. trade data in November 2023. That factor is something that may be seen in upcoming months, though we would expect much of it to affect trade between Europe, North Africa and the Middle East with the export economies in eastern Asia.

References

U.S. Census Bureau. Trade in Goods with China. Last updated: 9 January 2024.

U.S. Census Bureau. Trade in Goods with World, Not Seasonally Adjusted. Last updated: 9 January 2024.

Image credit: Stable Diffusion DreamStudio Beta. Prompt: “A large container ship being tossed about in stormy seas.”