Front running is a trading practice that's based on knowledge of the future. If you're a trader and you know that an upcoming event will affect the market, you can make trades that will be to your advantage both before and after the future event takes place.
In the context of the stock market, front running carries a negative connotation because insider trading is often involved. But what if your trade is the business of imports and exports and political leaders have announced they are going to impose tariffs or other trade restrictions on the exchange of goods between countries at a specific date in the future?
In that situation, insider trading isn't an issue, but dealing with the consequences of the political actions on your import/export business is. Once political actions affecting trade between countries are announced, savvy traders will go to work. And one of the tactics they will use to deal with the upcoming event that will affect their business is to front run it to the greatest extent they can. They'll move as many goods as they can ahead of when new tariffs or trade restrictions will go into effect.
Take the example of trade between the U.S. and China. Over the last six months, we've focused a lot of attention on how China acted to frontrun anti-free trade policies announced by the Biden-Harris administration.
The numbers have been big enough to affect the trajectory of the total value of goods traded between the two nations during the latter portion of 2024, moderately reversing what had been a long running downward trend that began after the Biden-Harris announced it would impose restrictions on trade between the U.S. and China in September 2022. The following chart chart shows how the total value of goods traded between the two nations has evolved from January 2016 through January 2025.
Although we've focused on China's exports to the United States in our coverage of the practice of front running in this trade, that practice has also been used to boost U.S. exports to China for the same reason of beating the clock on the new anti-free trade actions by the governments of the two nations.
We are planning an upcoming feature in the near future that will focus on some major anomalies that developed in the importing and exporting of goods to and from the U.S., at least one of which involves U.S. exporters frontrunning the Biden-Harris administration's trade sanctions. Anomalies so large they are materially affecting economic growth forecasts and the measure of the U.S.' gross domestic product.
We're also planning a separate feature to close the books on the Biden-Harris administration's anti-free trade policies, where we'll definitively answer the question of whether they had a larger or smaller impact on trade between the U.S. and China than the policies adopted by President Trump during his first term in office.
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 5 March 2025.
Image credit: Photo by Zalfa Imani on Unsplash.
Labels: trade
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