US-China trade ‘becoming less directly interdependent’ amid decoupling despite ‘misleading’ data

US exports to China increased by US$2.4 billion compared to a year earlier to US$153.8 billion in 2022, according to the US Bureau of Economic Analysis

But the data is ‘misleading’ according to the Peterson Institute of International Economics and the ‘two economies are becoming less directly interdependent’

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The US-based Peterson Institute of International Economics (PIIE) labelled the US-China phase-one trade deal a ‘historic failure’. Photo: XInhua

Published: 8:30pm, 17 Mar 2023

China is turning away from US imports, exacerbated by Washington’s effort to impose controls on the sales of semiconductor manufacturing equipment, as part of a bilateral decoupling, according to a new report, contrary to suggestions of record trade last year.

Relations between the world’s two largest economies have deteriorated since 2018 when the Trump administration began to impose import tariffs on more than US$300 billion worth of Chinese goods – measures the Biden administration has maintained.

In 2022, US exports to China increased by US$2.4 billion compared to a year earlier to US$153.8 billion, while American imports from China increased by US$31.8 billion to US$536.8 billion, according to the US Bureau of Economic Analysis.

But despite overall trade showing signs of resilience, the US-based Peterson Institute of International Economics (PIIE) said that the “widely reported data point was misleading” after it was suggested the supposed economic decoupling had not yet arrived after trade hit record levels in 2022.

Through trade, the two economies are becoming less directly interdependent

Peterson Institute of International Economics

“Through trade, the two economies are becoming less directly interdependent,” the Washington-based think tank said in a report released on Thursday.

“China is now shifting some purchases of foreign goods away from the United States. Both have the same fear: that the other side will suddenly weaponise trade flows- cut off imports or exports – in the name of security. Trying to get ahead of that, each is now attempting to diversify.”

In February 2022, PIIE labelled the US-China phase-one trade deal a “historic failure” after China “bought none” of the additional US$200 billion worth of goods and services over 2020-21 – relative to 2017’s levels – it promised under agreement which was signed in January 2020.

Before the trade war, manufacturing goods represented 44 per cent of the total amount of US goods and services exports to China – the largest component of pre-trade war commerce, PIIE said.