Shifts in US-China trade relations

Recent trade data points to the possibility of a decoupling between the economies of the United States and China, Washington's largest trading partner for a decade, as its market share recedes, making room for Mexico.

While discussions on "decoupling" or "risk reduction" regarding China persist within the Biden administration and among its Republican opponents led by Donald Trump, the upcoming presidential elections are expected to amplify the debate on China's role in foreign policy.

However, analysts caution that the reality is not necessarily straightforward, emphasizing the growing complexity of supply chains, making it challenging to curtail trade flows between the world's two largest economies.

Current economic indicators suggest a noticeable divergence between the US and Chinese economies. While China's imports, in absolute value, have not seen a significant decline, the market share has considerably shrunk, dropping from 22 percent in 2017 to 16 percent today, as per the Ministry of Finance's statistics.

Caroline Freund, an expert in international trade at the University of California, noted to Agence-France Presse that China's share of US imports has plummeted, bringing it back to the levels of 2007, before the global financial crisis.

She affirmed that the "decoupling is undoubtedly happening," attributing it not necessarily to a decline in imports from China but to the rapid expansion of trade with other partners such as Mexico.

Trade data from the US Department of Commerce reveals a significant increase in Mexican imports, particularly under the United States-Mexico-Canada Agreement.

Vietnam, among other Asian countries, has also seen a surge in exports to the United States in recent years, becoming one of its major trading partners. Vietnam, in particular, has benefited from reshaping trade dynamics across the Pacific.

Former Mexican Ambassador to Washington, Arturo Sarukhan, acknowledges that while Mexico has captured a portion, most of the production relocation from China has gone to Taiwan, South Korea, India, and Vietnam.

This shift is primarily due to their geographical proximity to China, making them attractive destinations for Chinese investments.

According to Henry Storey from "Dragoman Global," the main driver behind this relocation is that these countries benefit from their geographical proximity to China, making them capable of attracting Chinese investments.

Analysts, including Storey, believe that China's exports remain exceptionally strong despite China losing market share. Since the imposition of tariffs by Donald Trump in 2018, the fastest-growing export regions are the provinces located in the central and western parts of China.

AFP