'You can't tariff your way out out of a trade deficit': Here's why China's exports to the US have held up in the face of Trump's trade war
Business Insider
Published Dec 13, 2018 06:03AM ET
Updated Dec 13, 2018 09:32AM ET
- Growth of Chinese imports targeted by tariffs has fallen sharply in recent months.
- But the of $43.1 billion in November, with Chinese shipments to the US up by nearly a tenth from a year earlier.
"The Trump administration is learning you can't tariff your way out of a trade deficit," said Adam Ozimek, an economist at Moody's. "So, if you decrease some imports with tariffs it will be made up by greater imports in other goods and services or fewer exports. There are no surprises here."
Trade balances are determined by an assortment of factors, including foreign exchange rates, the strength of an economy, and how much a country borrows from abroad. There are countries with low tariff rates and significant trade surpluses, Ozimek noted.
The decline in imports subject to tariffs could also be due to a slowdown in frontloading, or companies rushing orders to avoid duties. There had been an added level of uncertainty when the first round of tariffs was levied because Americans weren't sure if Trump would follow through, said Mary Lovely, a professor at Syracuse University and expert on trade at the Peterson Institute for International Economics.
"Americans were on notice for later rounds of tariffs, though, and they did increase imports ahead of the tariff," she said. "This anticipation effect can be seen in the UBS charts. Recent declines in imports may reflect a letdown after this anticipatory stock up."
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Written By: Business Insider
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