But... "The New York Times:" Factories may be withdrawing from China. "
On August 29th, the website of The New York Times published an article titled "Factories may be withdrawing from China, but trade relations are stronger than they seem" by Anna Swanson and Jenna Smialek. The full text is excerpted as follows:
In the past five years, as the United States has become increasingly concerned about Beijing's dominant position in key industries, it has been committed to reducing its dependence on China in computer chips, solar panels, and various imported consumer goods.
However, as policymakers seek ways to sever ties with China, increasing evidence suggests that there is still a deep connection between the world's two largest economies, as Chinese products enter the US market through other countries. The latest and upcoming economic papers raise the question: Has the United States really reduced its dependence on China? What does the recent restructuring of trade relations mean for the global economy and American consumers?
The global manufacturing industry and supply chain are still constantly undergoing changes. The punitive tariffs implemented by former US President Donald Trump's government and stricter restrictions imposed by the Biden administration on the sale of technology to China are taking effect.
These re established trade rules and other economic changes have led to a decrease in the share of Chinese exports to the United States, while the share of other low-cost countries such as Vietnam and Mexico has increased. The Biden administration has also increased incentives for the production of semiconductors, electric vehicles, and solar panels in the United States, and manufacturing in the country is also growing rapidly.
However, a new study discussed at the annual meeting of the Kansas City Federal Reserve Bank held in Jackson Valley, Wyoming on Saturday found that despite changes in global trade patterns, the US supply chain still heavily relies on China, albeit not directly.
Although supporters of decoupling argue that staying away from China may be a good thing, this readjustment seems to have brought other consequences as well. The paper found that changes in the supply chain have also led to an increase in commodity prices.
According to the author's calculation, a 5 percentage point decrease in China's import share may lead to a 9.8% increase in the price of goods imported from Vietnam and a 3.2% increase in the price of goods imported from Mexico. Although more research is needed, they suggest that this impact may slightly boost inflation.
Ms. Alfaro said in an interview, "This is our first warning - it may have cost effects - and the second warning is that it is unlikely to reduce dependence on China."
This study is consistent with an upcoming paper by Caroline Froude from the University of California, San Diego, and economists from the World Bank and the International Monetary Fund. This paper investigates how the trade situation of specific goods imported from China has changed since Trump began imposing tariffs on China.
The paper found that tariffs have a substantial impact on trade, reducing the import volume of goods subject to tariffs by the United States, but the absolute value of trade between the United States and China is still increasing.
Freud said that the countries that can take away China's lost market share are those that can already specialize in producing products affected by tariffs, such as electronics or chemicals, as well as countries and regions that are deeply integrated with China's supply chain and have extensive trade with China.
She said, "They have also increased imports from China, precisely the products they export to the United States."
