Trading times

Weekly Updates

The volume of global trade as a share of the world economy has risen for ten consecutive quarters, and is now the highest proportion of world economy activity in modern times. How is this possible in an era of tariffs and trade wars? Three reasons stand out.
Generally, trade wars are a US affair. Most of the rest of the world has continued to trade nicely with one another. The US is an important consumer market, but is not everything.
The US consumer has shown considerable reluctance to cut imports. The act of threatening tariffs before they take effect creates a lot of noise in data, but broadly, the US is importing about as much today as it did in 2024. The seemingly insatiable demand for artificial intelligence is part of that resilience.
There is evidence that tariffs are being avoided. Comparing China’s export data and US import data shows that China claims to be exporting 30% more value to the US than the US claims to be importing from China. This is not because 30% of ships are sinking mid-Pacific. This level of distortion is unique to Sino-US trade. If imports from China are not identified as coming from China, the importer may pay a lower (or no) tax.