US-China Trade Sets Records

US-China economic decoupling is a fraud. And I say that as one of the early advocates of decoupling. In just the latest example, the volume of goods trade between the two countries set a record in 2022. Our goods trade deficit was the second-highest ever. This occurred despite a weakening American economy and COVID-caused disruptions in Chinese production and consumption near year’s end, which temporarily reduced trade.

There is a much-cited bipartisan consensus on China. The consensus is to speak loudly and carry a toothpick. It’s hard to know which is more inaccurate—that we’re finally being tough on China or that we’re getting so tough we might soon go too far. The same numbers prove both views wrong.

Combined 2020–2022 goods trade volume touched $1.9 trillion. This is despite the pandemic. Combined 2017–2019 volume was $1.84 trillion. That’s certainly showing China who’s boss. Or, if you’re worried about keeping American markets free, we remain completely free to have the world’s largest trade relationship with an anti-competition, anti–property rights, cult of personality dictatorship.

Supposedly path-breaking controls on semiconductor exports were released in interim form in early October last year. They were said to seriously disrupt American business. Semiconductor exports did fall from a record in 2021, but were the third-most ever and sharply higher than pre-pandemic. The final rule for chip export controls hasn’t appeared and the Department of Commerce has never implemented restrictions that cost substantial sales.

Back a bit farther in time is the laughable trade war. At $537 billion, goods imports from China in 2022 were all of $2 billion lower than the 2018 record. The Trump-Biden tariff era 2019–2022 has seen combined imports of $1.92 trillion, which includes a 10-year low in 2020 due to COVID. This is less than a 4-percent drop from the previous four years of “trade peace” which had no suppression of commerce from COVID.

Tariffs barely touched China’s exports. Did they instead go too far and hurt American consumers? Dominant among US imports from China are communications and computer equipment. These are 3 percent lower than they were in 2017, before tariffs were imposed. The $4-billion volume decline compares to $4-trillion increase in personal consumption over the same period. American consumers are doing OK.

The most disturbing trend isn’t a small decline, it’s a near-tripling in direct pharmaceutical and medicine imports in 2022. China is still far behind Ireland as a source for the US, but even Ireland faces some China dependence in pharmaceuticals. And there are products for which the US is completely reliant on China, such as antibiotics, hydrocortisone, and ibuprofen. Our response to date is writing a report.

In contrast to technology equipment and medicine, top American exports to China are soybeans, (sanctioned) semiconductors, and oil. The three combined are considerably smaller than either communications or computer imports. In 2022, soybean exports shattered their old record while aircraft and parts have suffered the biggest long-term decline. This doesn’t seem like a trend that arises out of standing up to China.

Nearly eight years ago, then-candidate Trump began focusing attention on trade with China. President Trump’s and President Biden’s China trade policies are similar and it’s sadly difficult to take them seriously. We’re not standing up to China and we’re not going too far. We’re not doing anything of consequence. As 2022 trade shows, again.