January 2023 should have seen U.S. imports from China rebound following the Chinese government's lifting of its failed zero-COVID lockdowns at the end of December 2022. Because those lockdowns had greatly disrupted significant sectors of China's export-generating economy, their end should have opened the door to a much higher level of goods being shipped to the United States.

That didn't happen. While the level of China's exports to the U.S. increased by 2.5% from December 2022's total to $38.3 billion in January 2023, it fell far short of its potential. Compared with January 2022, the level of U.S. imports from China is down by 20.1%.

That shortfall is responsible for pulling down the combined value of goods traded between the U.S. and China, continuing a trend that began in September 2022. This latest development has further pulled the trailing twelve-month average of the combined value of goods traded between the U.S. and China below a counterfactual trajectory based on the recovery of trade between the countries after the 2008-09 Great Recession. The following chart shows the post-pandemic trade recovery is now $3.6 billion below the alternate trajectory:

Looking forward, the latest trade news coming out from China indicates that the shortfall will continue into February:

China's exports for the January-February period fell, pointing to continued weakness in foreign demand and backing government concerns that a global slowdown will hamper the country's recovery from pandemic-era damage.

Imports dropped, too, government data showed on Tuesday, also reflecting weak foreign demand, since the country brings in parts and materials from abroad for many of its exports.

"Given the high inflation in the U.S. and Europe, demand from there should keep weakening, which also dampens the processing demand in China," said Iris Pang, chief economist for Greater China at ING.

Adjusted for inflation, the real value of goods being traded between the U.S. and China has fallen by more than the official customs data indicates.

References

U.S. Census Bureau. Trade in Goods with China. Last updated: 7 March 2023.

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