America and China remain intimately linked through trade despite heightened tensions over Taiwan and the Russian-Ukrainian war. More than a third of all US containerized imports arrive from China. More than a sixth of the value of Chinese exports comes from American purchases.
But there are growing signs of at least some decoupling. In recent months, US imports from China have fallen faster than total imports. Other Asian countries are increasingly taking market share in the United States from China, a trend that began before the pandemic and has continued.
Imports from China fall faster than total imports
According to new data from Descartes, US containerized imports in October were flat (+0.2%) compared to September. But imports from China fell 5.5% month-on-month, by 45,071 twenty-foot equivalent units. China’s decline was fully offset by gains from Thailand, South Korea, Taiwan, Japan and others.
In September, data from Descartes showed a 12% drop in total US imports from August. Imports from China fell faster: by 18% or 83,396 TEUs.
Chinese volumes accounted for 40% of all US imports in August, and an even higher share — 42% — in February. By last month, its share of US imports had fallen to 35%.
Chris Jones, executive vice president of industry and services at Descartes, told American Shipper: “You can see that during high-profile lockdowns [earlier in the year]there was always a good flow of goods out of China.
“However, there have also been high-profile comments from major retailers and others saying they are reducing their international purchases – largely out of China – and looking for other sources. And that is happening now. .
Bookings in China fall faster than total bookings
Data from FreightWaves SONAR shows that China-US freight bookings have slowed more than overall inbound bookings.
Throughout 2021, the index of loaded bookings in China was significantly higher than the index of all export destinations. The gap has narrowed since March and has now almost disappeared, as the China-US bookings index has fallen faster than the overall index.
Both indexes fell below 100 points this month (100 is pegged to January 2019 bookings). This implies low volumes from China and other countries arriving at US ports in December and early 2023.
Surprise drop in Chinese exports
On November 7, the Chinese government announced October export results well below expectations.
The value of exports fell 7.5% from September and 0.3% year on year. Economists polled by The Wall Street Journal had expected a 4% year-on-year increase.
The value of exports to the United States fell 14% year-on-year, a much steeper decline than total exports.
Other Asian countries taking market share
Export data and Descartes import data indicate a recent decline which may or may not be transitory. Another indicator – US Census statistics on metric tons of US imports – highlights a trend that has been building for years.
US imports from China were much higher than imports from other Asian countries in the years following the financial crisis. From 2009 to 2018, the average cargo tonnage imported from China in the first nine months of the year was 47% higher than the average import tonnage of all other Asian countries combined.
But in 2019, imports from China were only 12% higher. In 2020-2021, amid the pandemic, imports from China were nearly on par with those from other countries. In the first nine months of this year, things turned around: cargo tonnage imported from China was 6% lower than imports from Asian competitors.
Monthly market share data show how the move towards import diversification predates the pandemic.
In 2016-2018, China accounted for an average of 36% of cargo tonnage imported from the United States, with the rest of Asia accounting for only 25%. China’s average monthly share had fallen to 31% in 20119, and the rest of Asia’s share had risen to 29%. In 2020-2021, they were even at 30% each.
In the first nine months of this year, China’s share remained at 30% and the rest of Asia took the lead at 32%.
Preparing for the future
“It started before 2022,” said Paul Bingham, director of transportation consulting at S&P Global, in an interview with American Shipper last month. “[Events] this year has obviously added urgency and attention to this strategy – that at a minimum, companies need to diversify supply chains even if they are not going to abandon China altogether.
China Beige Book CEO Leland Miller said at this month’s FreightWaves F3 event: “You see certain sectors becoming very, very sensitive – things like technology and pharmaceuticals. These are identified as areas where supply chains need to be removed from China as a national security concern. They will be retired in the months, quarters and years to come.
“On the other side, you have a lot of things that are primarily economic and not considered a security issue. For now, these are identified as OK. But the line for that changes depending on the tensions between China and the United States. Two, three years later – especially if there’s hostilities over Taiwan or the South China Sea or trade relations – that line keeps moving, and there could be more and more pressure to withdraw supply chains from China.
When asked if US importers should look for alternative sources, Miller replied, “I don’t think you can avoid doing that. Because we know what the worst-case scenario is, but we have no idea how close we will get to the worst-case scenario in the next five or ten years. Will we have a war for Taiwan? Will the economic and commercial aspect deteriorate further? We don’t know how bad things could get. But we know that not doing contingency planning is a very dangerous option.
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