China’s soybean tariffs have—rightly—gotten a lot of attention. They have had a large impact not just on U.S. soybean exports to China, but on overall soybean exports. And, at least for a time, they pushed U.S. soybean prices below the global market price, as—without any purchases from China, Inc (and it really is China, Inc, think COFCO and Sinograin)—American beans had to sell at a discount to induce others to buy U.S. beans.
Soybeans traditionally have accounted for about 10 percent of total U.S. (goods) exports to China, so they alone have had a substantial impact on the overall trade numbers.
But, well, at least looking backwards, it seems that the success of China’s retaliation against U.S. soybeans isn’t actually all that typical.
In some other sectors, like oil, China’s tariffs reduced exports to China but not overall U.S. exports.
And China’s tariffs on U.S. exports for manufactures—together with a modest reduction in China’s tariffs on imports from others— haven’t had much of an apparent impact on total exports to China.* Somewhat to my surprise to be honest.
One set of tariffs (on commodities) has had a very large impact: exports are down over 60 percent, and the fall isn’t over (the trailing 12M sum is a slow moving indicator). And another (on manufactures) has had a more modest impact than expected.
Of course, China hasn’t put tariffs on all U.S. manufacturing exports: China, per Chad Bown of the Peterson Institute, has only put tariffs on 55 percent of U.S. goods exports and some major categories of U.S. manufactures (like aircraft) have been left out. But in the process of raising its overall effective tariff rate on U.S. exports from 8 percent to 18 percent last summer, it did put tariffs on a decent chunk of U.S. manufacturing exports (see Bown’s figure 3). So there should be some impact, and enough time has passed that there should be more of an impact in the numbers than is apparent at first glance. Or even at a second glance.
I challenge anyone to identify the date China’s raised tariffs on U.S. manufacturing exports just from the aggregate data on U.S. exports to China over the last 12 months (China’s 2015 slowdown actually jumps out more, for now)
To be sure, there has been some impact. That’s clear if you look at the changes in the trailing 3M sum of U.S. and European exports to China. There was a bigger drop off in American exports to China than in European exports to China last fall, though not one so big that it could not be, in part, a function of the dollar’s strength relative to the euro (the United States generally has under performed relative to Europe after the dollar’s 2014-15 appreciation).
And to be honest, the modest fall has been a bit of a surprise. I at least expected a bigger fall off in U.S. manufacturing exports to China.
Two potential reasons why.
One. China has exercised a bit of restraint, and held back on really restricting trade in some sectors to make sure it has targets to retaliate against should Trump broaden the tariffs further.
Two. China lacks good targets, as the bulk of its manufactured imports from the United States are in sectors where there isn’t (for now) a domestic Chinese alternative (widebody aircraft) and thus Chinese firms have to pay the tariff to get essential imports or in sectors where imports from the U.S. feed into China’s exports and thus Chinese tariffs would add to rather than reduce the shock to Chinese exports from the U.S. tariffs.
[To view the original research, click here]A Tale of Two Tariffs- China’s So Far I...Exports | Council on Foreign Relations
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