E The Perils Of The Covid-19 Trade War

The perils of the Covid-19 trade war are increasing. Imports from China have fallen off a cliff. Imports are approaching Great Recession levels as the American consumer has really pulled back. It has been reported that the Fed has said 40 percent of those earning less than $40,000 per year are laid off in America. That is a horrible number, and due to safety concerns, some may wait a long time to get jobs back if at all. 

U.S. Bureau of Economic Analysis and U.S. Census Bureau, U.S. Imports of Goods by Customs Basis from China [IMPCH], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/IMPCH, May 12, 2020.

Exports to China have fallen some as well as we see from the second chart. But falling not to the extent of imports from China. The chart below shows that China's purchases from America, despite the abuses that Trump has heaped on that nation, are still holding up somewhat.

U.S. Bureau of Economic Analysis and U.S. Census Bureau, U.S. Exports of Goods by F.A.S. Basis to Mainland China [EXPCH], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/EXPCH, May 12, 2020.

Exports to China are even showing a slight rebound and are not nearly as meager as they were in the Great Recession. These two charts above appear favorable to the USA. They appear to be an improvement from before as to the balance of trade. So why is POTUS threatening more tariffs and still larger trade war?

Both nations are talking about scrapping Phase 1. But the trade deficit appears to be more favorable to the USA now than before the virus:

2020: U.S. trade in goods with China

NOTE: All figures are in millions of U.S. dollars on a nominal basis, not seasonally adjusted unless otherwise specified. Details may not equal totals due to rounding. Table reflects only those months for which there was trade.

Month

Exports

Imports

Balance

January 2020

7,215.3

33,280.6

-26,065.3

February 2020

6,815.0

22,813.1

-15,998.1

March 2020

7,971.9

19,805.4

-11,833.5

TOTAL 2020

22,002.2

75,899.1

-53,896.9

Banking on China

There has been a lot of talk about moving supply chains and whole factories to the west, out of China, due to the Covid-19. Yet it appears from Japanese firms as an example, that the upside of staying close to 1.3 billion customers overshadows reasons to secure supply chains in the home nation.

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Disclosure: I have no financial interest in any companies or industries mentioned. I am not an investment counselor nor am I an attorney so my views are not to be considered investment ...

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