China's vanishing trade

Weekly Updates

The Chief Economist's comment published this week identified almost half of the exports leaving China for the US are not recorded as US imports from China. Those that do arrive may transform on route, with the imports reported as being different goods to the exports.
This pattern is specific to China-US trade. China's trade with other countries has no large-scale sleight of hand. China's trade with the US used to be conventional. The changes occurred only after US President Trump's first term tariffs.
This suggests that US importers have become adept at avoiding or minimizing the tariffs they pay. That implies less US fiscal tightening (limiting damage to growth), less US inflation, and better exports for China than would otherwise occur.
This is not costless for China. Rerouting goods may not exempt US imports from all tariffs. Rerouting may raise exporters' or importers' costs. There may also be political fallout. The US administration is unhappy with tariff avoidance (ascribing blame between exporter and importer could be tricky). Countries used as stop-off points in rerouting may experience a surge in "imports" from China, creating new trade tensions. Any future reduction in China-US trade tensions may bring only limited economic benefits if the costs are already constrained.