In Reason, Liz Wolfe outlines some of the reasons China has not been suffering under the tariffs President Trump has levied on them over the last few months (unlike, say, Canada):
President Donald Trump and PRC President Xi Jinping at the G20 Japan Summit in Osaka, 29 June, 2019.
Cropped from an official White House photo by Shealah Craighead via Wikimedia Commons.
Total Chinese exports surged in July … but not to us. Compared to July 2024, Chinese exports were up 7.2 percent last month. “Its exports to Southeast Asia and Africa, key regions for reshipment to the United States, rose more than twice as fast as its overall exports”, per The New York Times‘ reading of the data. “China’s exports to the European Union, its main alternative to the American market, were also up very strongly.”
Specifically, “data released Thursday by the customs authorities showed the pickup was driven by strong growth in shipments to the European Union, Southeast Asia, Australia, Hong Kong and other markets, which more than made up for the fourth month of double-digit declines in US purchases”, reports Bloomberg.
Predictably, even the threat of tariffs has been enough to dampen trade. Remember, Washington and Beijing are still operating under a 90-day truce — set to expire on August 12, though it could be extended if a new agreement is reached — that holds off the imposition of higher tariff levels, namely, the tit-for-tat tariff increases that both countries had threatened. The truce also staves off export controls on certain critical rare-earth minerals and items that fall into the technology category. But still, current tariff levels mean a baseline 30 percent tariff on Chinese imports, which has been enough to depress trade.
For those in the Trump administration who are worried about trade deficits in particular, I suppose the good news is that we’ve made progress there: “For the last several decades, China has been selling as much as $4 worth of goods to the United States for each $1 of American goods that it buys”, reports The New York Times. Following China’s admission into the World Trade Organization, the trade deficit rose. Now, “tariffs have begun to reduce the imbalance. The United States announced on Tuesday that its overall trade deficit had narrowed in June to $60.2 billion, the smallest in nearly two years.”
It’s not clear why Trump administration officials, and the president himself, are so worried about trade deficits as something to eliminate for their own sake. We are dependent on Chinese goods to a rather substantial degree, which would pose a problem in the event of war with China (which is why the previous administration focused on improving our semiconductor manufacturing capabilities back in 2022). But you can just as easily make the case that it’s the vast volume of trade between the two countries — the deeply intertwined economies so reliant on each other (despite China’s claims of autarky and, more amusingly, communism) — that are incentivizing continued decent relations.
A few factors are at play that might help to explain why you likely haven’t felt a drastic increase in prices just yet. First, since there’s been a long lead-up to this trade war, many larger importers have stockpiled product over the last few months, so shortages haven’t been felt yet — they’ve just been selling off product they’ve been storing. Second, China has already managed to divert some stages of manufacturing to other countries—namely Vietnam — and some larger companies already have factories up and running in other Southeast Asian countries to avoid the “made in China” or “shipped from China” labeling. Expect more transshipping and manufacturing-locale creativity as a means of throwing customs officials off the scent.
