Consumers in the U.S., facing higher prices and lower incomes, are running out of money and have started buying far fewer Chinese imports, a diminishment of expenditures that is now rippling throughout the global economy.
This week, China reported exports up 7.1% year-on-year to $314.9 billion in August, falling short of expectations. Analysts had expected exports to increase around 13%. It’s the weakest increase year-on-year in Chinese exports since April.
Most significantly, exports to the U.S., China’s top trading partner and the world’s biggest importer, fell 3.7% to $49.8 billion.
It’s part of a global economic slowdown. The overall world economy shrank in August for the first time in over two years, according to a survey of purchasing managers surveyed by S&P. “Consumption patterns are shifting back from durable goods to services,” research group Capital Economics wrote. “Going forward, high inflation and tighter financial conditions elsewhere will also be an increasing drag on foreign demand for Chinese goods.”
Other headwinds faced by China’s export machine include a resurgence of Covid-19, heatwaves, power outages, and Russia’s war in Ukraine which continues to hurt supply of some commodities.
By comparison with the U.S., exports to the EU, whose economy appears in better shape, rose 11.1% to $51.4 billion. Exports to ASEAN nations rose 25.2% to $49.4 billion. Exports to Vietnam rose 11.5% to $12.4 billion. There is one market that continue to take more Chinese exports. Exports to Russia rose 26.7% to $8 billion.
There are signs that the slump in U.S. consumption is having a real effect on Chinese industrial activity. Chinese factories need fewer raw materials. Natural gas imports fell 14.5% to 8.8 million tons. Coal imports increased 5.5% by quantity to 29.5 million tons and 31% by value to $4.1 billion.
As China’s export power fades a bit, its importance as a global market of over a billion consumers will grow. Imports from the U.S. declined 7.3% to $13 billion. Imports from the EU rose 3.5% to $26.1 billion. Imports from ASEAN countries increased 5% to $34.5 billion.
The slowdown in trade with the U.S. reflects a change in balance of power. Imports of soybeans, a key promise by China during the Trump administration, fell 24.5% by quantity to 7.2 million tons and 6.5% by value to $5.2 billion.
China’s activity as part of the complex global supply chain has diminished. High-tech imports fell 11% to $63.7 billion.
Inflation continues to distort trade statistics. Exports of fertilizers, for example, increased 24% by value to $1.4 billion, but fell 0.3% by quantity to 2.8 million tons. Mobile phone shipments increased 21.5% by value to $9 billion but fell 3.1% by quantity to 67.7 million units.
In some cases, however, price inflation hasn’t impacted exports. People are simply buying less than they were before. For example, exports of household appliances fell 16.5% by value to $7.2 billion and 18.7% by quantity to 280.8 million sets. Exports of suitcases and luggage rose 24% by value to $3.2 billion and 16.7% by quantity to 261,770 tons.
People continue to go outside and travel more. Footwear exports increased 16.4% to $5.5 billion.
Increasingly in trade statistics, there is an apparent split of the global economy by class. Put simply, trade in goods for rich people is booming. Motor vehicle exports rose 65.3% by value to $6.1 billion and 47.5% by quantity to 307,914. Imports of motor vehicles rose 27.7% to $4.5 billion. By quantity, they increased 26.5% to 75,841. Paper pulp imports rose 12.5% to $2.2 billion.
In basic consumer goods, however, the slump is real. Exports of high-tech products fell 3.7% to $76.9 billion.