According to Bloomberg article published on March 15, 2023, after nearly five years of open economic conflict, the US-China trade relationship is beginning to show a “general pattern” of decoupling even as globalization more broadly remains resilient, according to DHL’s global connectedness index.
US-China trade flows hit an all-time record of $690.6 billion in 2022 and yes, and the two nations are connected by larger trade flows than any other pair of countries without a common border. So one of the main takeaways in DHL’s report released Wednesday is that globalization isn’t in retreat.
Still, the 304-page analysis dug deeper into the data and found that both the US and China have meaningfully reduced the share of their imports coming from each other — which DHL said is indicative of economic decoupling.
In 2022, the share of imported Chinese goods as a percentage of total US imports fell to 16.6%, down from 21.6% in 2017 — the last year before former President Donald Trump launched his trade war. At the same time, the value of US goods exported to China in 2022 as a percentage of total US exports fell to 7.3%, down from 8.4% in 2017.
Tariffs initiated by Trump in 2018 and maintained by President Joe Biden are the primary cause for the decline in US-China trade flows, according to the report, which cited analysis from the Peterson Institute for International Economics.
US imports of Chinese goods that were subjected to the highest US tariffs, were 22% lower in mid-2022 than they were before the start of the trade war in 2018, while imports from the rest of the world were up 34%. In contrast, US imports of Chinese goods that were not subject to US tariffs during the trade war were up 50%.
‘Remarkably Resilient’
“The data make clear that international flows have proven remarkably resilient through recent crises, and they strongly rebut the notion that globalization has given way to deglobalization,” according to the report, produced with New York University’s Stern School of Business.
“Today’s threats to globalization, nonetheless, are real and demand serious attention,” it continued. “It would be a mistake to infer from the recent resilience of international flows that globalization cannot go into reverse."
The report analyzed various other data points — including foreign direct investment, migration trends and scientific research collaboration — and found that the share of nearly all of these cross-border flows involving China declined since 2016.
Interestingly, the report found little evidence that America’s allies were meaningfully decoupling from China and its allies in terms of merchandise trade.
While there were some declines in cross-border flows between US allies and China (and vice versa), the magnitude of the shift was much more limited than the decoupling observed between the US and China.
“Even as US-China decoupling has advanced, it has not — at least yet — led to substantial fragmentation between rival blocs of countries,” according to the report, co-authored by NYU professor Steven Altman and Caroline Bastian, a research scholar at Stern’s DHL Initiative on Globalization.
The paper’s advice to policy makers: “Use the recent strength of international flows as a platform to improve globalization in ways that expand its benefits and better manage its side effects — what many leaders and scholars are starting to call reglobalization.”
