After July 2024's tariff-clock beating surge, the total value of trade recorded between the U.S. and China coasted slightly higher in August 2024, even as its momentum reversed.
With the Biden-Harris administration's new and expanded set of tariffs taking effect during the month, the negative change in momentum was expected. Importers of goods from China had rushed to pull as many deliveries of goods subject to the new tariffs ahead as possible, which by itself will diminish the level of trade in the months ahead. Although these imports typically peak in October each year, the actions to avoid the Biden-Harris administration's tariffs likely moved 2024's peak to July. U.S. imports of goods from China fell in August.
The total value of trade was up in August 2024 however because U.S. exports of agricultural goods like soybeans to China rose. U.S. exports of these goods to China are typically elevated during the last quarter of the year, but were elevated year-over-year.
The following chart shows how the August 2024 surge impacted the total value of goods traded between the U.S. and China.
This chart shows the nominal level of the total value of goods exchanged between the U.S. and China over the period from January 2017 through August 2024. Unfortunately, it doesn't fully convey the effects of the tariffs and other events on the level of U.S. and China trade.
For that, we need to take the effects of inflation into account. In the next chart, we've done that for the combined value of goods imported and exported between the U.S. and China, which are expressed in terms of constant 2017 U.S. dollars.
The level of trade between the U.S. and China peaked at $54.2 billion in 2017 USD in September 2018, when the Trump administration initiated a tariff war with China (Event A). The level of trade dropped 18.4% to $44.8 billion in 2017 USD, which would have marked a bottom given December 2017 Phase 1 trade deal between the U.S. and China, but didn't because of the onset of the coronavirus pandemic (Event B). The pandemic took the inflation-adjusted bottom of trade between the U.S. and China down to its Trump-era low of $42.8 billion in April 2020, some 21.1% below its September 2018 peak (Event C).
After April 2020, the level of trade grew rapidly, until the Biden-Harris administration initiated a period of high inflation for the U.S. economy with the passage of the American Rescue Plan Act of 2021 in March 2021 (Event D). The high inflation unleased in this period stalled the recovery in trade between the two nations, which ranged between $50 and $51 billion through September 2022.
That coincides with the peak in trade ahead of the Biden-Harris administration's announcement of its own tariffs and export restrictions on U.S. semiconductor technologies, which crashed the amount of trade between the U.S. and China. The level of trade plunged $9.8 from $50.9 billion in September 2022 to bottom at $41.1 billion in May 2024.
At this point, the Biden-Harris administration's trade sanctions against China have been more damaging in inflation-adjusted terms than the Trump administration's non-pandemic affected sanctions. However, in May 2024, the Biden-Harris administration announced new and expanded tariffs and other trade sanctions in May 2024 (Event E), which started taking effect in August 2024 and is already negatively affecting the trade data. That impact will continue in the months ahead.
References
U.S. Census Bureau. U.S. International Trade in Goods and Services (FT900). U.S. Trade in Goods with China, Not Seasonally Adjusted, Nominal Figures, Total Census Basis. [Online database]. Accessed 12 October 2024.
U.S. Census Bureau. U.S. International Trade in Goods and Services (FT900). U.S. Trade in Goods with World, Seasonally Adjusted, Nominal Figures, Total Census Basis. [Excel spreadsheet]. Accessed 12 October 2024.
U.S. Census Bureau. U.S. International Trade in Goods and Services (FT900). Real U.S. Trade in Goods with World, Seasonally Adjusted, Chained 2017 U.S. Dollars, Total Census Basis. [Excel spreadsheet]. Accessed 12 October 2024.
Image Credit: A large cargo ship docked in a harbor photo by Matt Benson on Unsplash.