Unexpectedly Intriguing!
July 14, 2020

Trade data between the U.S. and China in May 2020 show early signs of economic recovery following the negative impact of government-mandated business closures to address the coronavirus pandemic earlier in 2020.

We can see that in the rebound of the combined value of trade in goods and services between the two countries, which continued to rise following April 2020's initial rebound that began after China reopened its economy. At $46.2 billion, the combined value of U.S.-China trade was within $2.1 billion of its May 2019 level, the narrowest gap between year-over-year figures since the outbreak of the coronavirus pandemic in China began at the end of 2019.

Combined Value of U.S. Exports to China and Imports from China, January 2008 - May 2020

Since the end of 2019, a $6.0 billion gap has opened up between the trailing twelve month average of the value of U.S.-China trade and a counterfactual based on a reasonable estimate of what that trade would look like following January 2020's 'Phase 1' trade deal between the two nations. More importantly, the downward trajectory of the trailing year average has begun to decelerate in May 2020, which is an indication a recovery from the global coronavirus trade recession is beginning to take hold.

May 2020 saw much of the U.S. economy beginning to incrementally open on a state-by-state basis, following the lifting of statewide lockdown restrictions that closed many businesses and ordered residents to stay-at-home to slow the spread within the U.S., but which continued to negatively weigh on its economy during the month. We can see that impact in the year-over-year growth rates of U.S. exports to China and U.S. imports from China, where the exchange rate-adjusted growth rate of exports was positive, but imports were negative, as might be expected.

Year Over Year Growth Rate of U.S.-China Trade, January 1986 - May 2020

The data for U.S. exports to China also answers the question we had last month regarding what extent the surge in U.S. exports to China in April 2020 might have been attributed to shipments that had been bottlenecked to that country while its economy was closed by its coronavirus epidemic earlier in 2020. Since the year over year growth rate of U.S. exports to China for May 2020 is 10.1% versus April 2020's 14.7%, the answer is "not all that much".

Looking forward, the delayed spread of coronavirus infections in parts of the U.S. that avoided the worst of the pandemic after it initially arrived presents the largest challenge for a rapid economic recovery. This delayed crest effect is not limited to the United States, as China is also experiencing a similar dynamic in confronting the continued spread of the SARS-CoV-2 coronavirus.

Previously on Political Calculations

Here are the previous episodes of our series exploring the impact of the coronavirus pandemic on trade between the U.S. and China, presented in reverse chronological order!

References

Board of Governors of the Federal Reserve System. China / U.S. Foreign Exchange Rate. G.5 Foreign Exchange Rates. Accessed 10 July 2020.

U.S. Census Bureau. Trade in Goods with China. Accessed 10 July 2020.

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