Amid New Export Controls, U.S. – China Trade Shrinks



John W. Miller | Trade Data Monitor

As the U.S. imposes new export controls on high-tech computer chips, the country’s trade with China is already starting to show deeper cuts from a years-long trade war.

Chinese to the U.S. in September dropped 11.5% year-on-year to $50.7 billion, compared to a 3.8% decline in August, and shrinking the trade surplus 14% to $36.1 billion, according to figures released by Beijing this week.

Overall, Chinese exports increased 5.7% in September to $322.8 billion.

Since the first wave of tariffs on $350 billion of imports announced by President Trump in 2018, U.S. key electronics imports from China have fallen 62%, while imports from elsewhere increased 60%, according to a study published this month by the Peterson Institute for International Economics.

In September, Chinese imports of “electronic integrated circuits and microassemblies” from the U.S. declined 13.7% to $1.6 billion.

For China, the trade tensions with the U.S. are a key strategic consideration. The U.S is China’s top importer. As China debated its leadership transition, Beijing delayed the release of its monthly trade statistics, originally scheduled for Oct. 14, by over a week.

Xi Jinping was appointed Sunday to a third five-year term as leader of the Communist Party. He’s yet to summit with President Biden to talk about softening their stances in the ongoing trade war.

As trade with the U.S. slows, Chinese companies have been establishing tighter trade links with other counties in Asia.

China’s exports to countries that are part of the ASEAN alliance rose 29.5% to $52.3 billion in September, and imports increased 5.4% to around $38 billion. By comparison, shipments to the EU increased 5.6% to around $47 billion, and imports fell 8.2% to $23.8 billion. Exports to Vietnam increased 23% to $12.8 billion. And even some parts of Europe might become preferable markets. Exports to the Netherlands rose 18.4% to $10.3 billion. Xi Jinping has called for more self-reliance in technology to cope with U.S. controls, an upgraded military capability, and the protection of essential interests outside of China.

In general, the Chinese trading economy is stalled. Imports in September were roughly flat at $238 billion. Imports from Taiwan, South Korea, Japan, the U.S. and Australia all dropped.

One exception: Imports from Russia rose 53.9% to $10.7 billion. Over 70% of that was mineral fuel. In general, China has forged a tighter trade relationship with Moscow since Russia’s invasion of Ukraine in the spring. Exports to Russia increased 21.3% to $8 billion. Chinese exports of cars to Russia rose 78.2% to $599.7 million. Shipments of machinery rose 24% to $1.8 billion, and electronics 31.8% to $1.5 billion.

Overall, Chinese trade with Russia in the first nine months of 2022 rose 32% to $136 billion.

The relationship with Russia has allowed Chinese buyers to acquire oil and gas at low prices. China has also begun transshipping more mineral fuels. Exports of fuels rose 133% to $7.8 billion. Overall, fuel imports by value rose 28.8% to $45 billion.

China’s economy is maturing and it is no longer just the factory floor for U.S. and European companies. But that maturity is revealing adaptability. For example, Chinese tobacco exports increased in September by over a thousand percent, rising to $756.8 million from $67.5 million.

There are signs that China is turning inward, and will soon have an economy of a scale large enough to sustain itself, some analysts believe.

One example: the robust growth of its automotive industry. Car and truck exports increased 36.9% in September to $14 billion. Vehicle imports, on the other hand, declined 14.1% to $6.6 billion.

John W. Miller is Trade Data Monitor’s Chief Economic Analyst, in charge of writing TDM Insights, a newsletter analyzing key issues through trade statistics. John is an award-winning journalist who’s reported from 45 countries for the Wall Street Journal, Time Magazine, and NPR.