Trade in a Time of Geopolitical Adjustment
The focus of the global trade world is, rightly, on President-elect Donald Trump and the U.S. debating and deciding how far they’ll go in enacting new protectionist measures.
But an issue that could upend geopolitics — with unintended consequences that will affect big issues like war and peace, migration, and supply chains — just as much is what appears to be a crumbling in Chinese domestic demand.
In a time of geopolitical shifting and adjustments, it’s one of the key factors to watch. In the first six months of 2024, according to TDM, China was the world’s second largest importer, shipping in $1.3 trillion worth of goods, behind only the U.S. at $1.6 trillion, and followed by Germany, the Netherlands, and the UK. (France, Japan, India, South Korea and Italy round out the top ten.)
In November, total Chinese imports fell 3.9% to $214.9 billion from $223.6 billion a year ago.
What Will Happen to Chinese Demand?
Almost certainly knowing these numbers were coming, Beijing on Monday said it would unroll an “appropriately loose” monetary policy in 2025. That would be its first unwinding in almost 15 years. The goal will be to increase demand domestically and goose consumer consumption, according to government officials. Beijing also plans to give more subsidies, and even hand out consumer vouchers. China would embrace “the principle of pursuing progress while maintaining stability,” state news agency Xinhua said.
The declines spanned the globe. Imports from the EU fell 6.5% to $21.7 billion. Imports from the U.S. dropped 11.3% to $12.4 billion. Imports from ASEAN countries declined 2.5% to $33.6 billion.
In November, imports of agricultural products fell 15% year-on-year to $15.8 billion. Purchases of grain fell 35.7% to $4.3 billion. Imports of motor vehicles plummeted 28.9% to $3.3 billion. China’s preliminary monthly trade report doesn’t break out consumer goods in much detail, but some products offer hints of consumer confidence. Imports of cosmetics and clean-care products, for example, dropped 8.3% to $1.2 billion.
Et Tu, Electronics?
One sector of global trade that had expected to survive the coming choppy waters is consumer electronics. There will surely be more curbs like those enacted by the U.S. on sales of chips, but in general the supply chains needed to produce iPhones and laptops is meant to endure. But here, too, there are signs of weakening. In November, Chinese imports of high-tech products rose only 2.6% to $64.7 billion. Imports of copper ore and concentrates, a key ingredient in making electronics, fell 8.1% to 2.2 million tons.
El resto del mundo
China’s export picture was a little better in November, although there was still some softening, because of new tariffs and sluggish demand. Shipments of agricultural products rose 7.4% to $9.8 billion. Exports of high-tech products increased 6.5% to $81.8 billion. Exports of toys rose 4.9% to $3.1 billion. Some of these shipments were ordered over the summer as it became clear that Trump might win a second term to the White House. We’re likely to see a lot more of that in December and January, say analysts.
Total Chinese exports increased 6.7% year-on-year to $312.3 billion in November 2024 from $292.6 billion the year before. The forecast by analysts had been around 8.5%, and that was a drop from a 12.7% increase in October. Exports to the European Union rose 6.7% to $41.1 billion. Exports to ASEAN countries rose 14.7% to $53.7 billion. Exports to the U.S. rose 7.3% to $47.3 billion. Exports to Vietnam rose 12.3% to $14.5 billion.
To be sure, factories in China have been affected by general sluggish in consumer confidence around the world. Sales of shoes dropped 1.9% to $3.8 billion. Exports of mobile phones slipped 0.3% to $16.9 billion. Even exports of motor vehicles, a staple of Chinese export success, dropped 7.7% to $9.1 billion. The U.S., EU, and Canada have all slapped duties on imports of Chinese electric vehicles.
John W. Miller