Last year The Economist argued that lots of the supposed decoupling between America and China is in fact illusory. Look closer, we wrote, and the two countries' economic relationship is holding strong, even if this fact is masked by tricks on both sides. Since then a growing body of evidence confirms, and strengthens, our original findings. The economics of America and China are not coming apart. Indeed, some changes to supply chains may be binding the two countries even closer together.
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A complete picture of Chinese-American trade would cover trade in services, including America's use of Chinese apps and China's love of American films. But these are difficult to track, meaning that economists have focused their attention on trade of goods, which customs officials measure reasonably accurately.
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The headline [trade] figures do not tell the whole story, however. To understand why, start with Mr Trump's tariffs, which Mr Biden has largely kept in place. Before their introduction in 2018, American statistics suggested that America received many more imports from China than did Chinese statistics. Now the opposite is true. China reports that its exports to America rose by $30 bn between 2020 and 2023 whereas America says its Chinese imports fell by $100 bn. If China's data are correct, the country's share of American imports still declined, but by much less.
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Other data provide additional reason for skepticism about decoupling. "Input-output" tables, as published by the Asian Development Bank, show the share of a country's economic activity that can be traced back to others. Examining 35 industries, we calculate that in 2017 the Chinese private sector contributed on average 0.41% of American firms' inputs. That may not sound like much, but it beat the 0.38% that came from Germany and the 0.24% from Japan. By 2022 China's share had more than doubled to 1.06%, a larger proportional increase than for either Germany or Japan.
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We estimate that since 2019 China's global exports of intermediate goods have risen by 32%, compared with a rise in other sorts of exports, such as finished goods, of only 2%. The surge is driven by exports to countries such as India and Vietnam, which are two of the American government's preferred trading partners. American trade with these countries is, in turn, increasing - from 4.1% of its goods imports in 2017 to 6.4% today. In combination, these trends imply that the two countries often act as something akin to packaging hubs for goods made with Chinese inputs that are destined for America's shores... Vietnam's trade with America is booming... [T]he South-East Asia manufacturing high-flyer increasingly plays a role as a conduit, matching Chinese production to American demand.
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