My wife worked for a global electronics company in Trump 1. They were early decouplers. When the first trade war happened they discussed it with their factory counterparts in China and they shifted production to Vietnam. Same factory owners, same parts suppliers, different country of origin.
A couple of years later the company itself was sold to a group of Chinese investors, who didn't change this arrangement.
Soybeans? I wonder about Nvidia chips. Until proven otherwise, I presume that the most corrupt and damaging thing is what he wants to do. Tell me I'm wrong, I'd welcome that.
So basically, assembly is leaving China, but the real story is in the data on intermediate goods. Even a "Made in Vietnam" iPhone still contains Chinese parts. Over the past decade, China has steadily shifted its focus to manufacturing components, processing minerals, and other upstream activities, while most people debated where products were ultimately assembled. Both countries are now using other countries to make their stuff, but we all know who controls the upstream resources better. Assembly may have moved, but the reliance on China remains.
You can count on an ignorant, not intelligent man who surrounds himself with sycophants, to continue to make stupid decisions.
By "stupid decisions" I mean harm to the USA economy and an opportunity to enrich himself and the Trump organization.
Other than the persistence of tariffs (and his belief in their effects), I do not see an over-arching economic plan for our nation from Trump 2.
He has always abided in the principle "use other people's money." As a business man, it was investors and taxing authorities. Now, it's just taxing authorities (the US Treasury).
He has an insatiable appetite for "feeling important" using gold, $$, and power as symbols of same.
As a trained observer of behavior, I can see that this appetite will NEVER be satisfied. Sad situation for all of us on the receiving end of his shite....
Nice article.... one think to keep in mind... the most valuable US exports are virtual IP (R&D designs, SW, AI models, etc) ... these are not well accounted for in GDP calculations and especially trade statistics.
Lots of good graphs of data in this piece. Interesting. I am not sure why it matters to the US where its imports are coming from. Are you saying it is safer for the US to import from a diverse group of countries? Is there a concern we should not import from China because we plan to fight a war with China? Why fight China? To defend Taiwan? To defend democracy? Americans do not care about either Taiwan or democracy.
Ironically, the war in Iran might temporarily tie us closer to China. We blew through a chunk of the missle stockpile. We need rare earth minerals. Guess what China has in droves…
Trump has always desired the autocratic trappings of Xi, but he was much more of a supplicant in their recent visit.
Look at Electrolux whose North American arm is faltering badly - it’s partnering with a Chinese manufacturing company (whose name escapes me) - I’m not clear on the details but eventually Electrolux will probably sell that part of the business to them and we’ll have fairly high-end Chinese appliances - that’s how china is trying to get out of low-end manufacturing - makes me very uneasy but my husband thinks I’m being paranoid - anyone have more expertise in this area?
Noah, the piece rings true on the political win; on the industrial side, it might take longer.
Vietnam will need a decade to graduate from FDI-led assembly to indigenous large-system building. Korea got there with Barakah. Vietnam will get there given enough time.
But on the American side, we long forgot how to build 100,000-ton ships, gigawatt-scale reactors cheaply, and HALEU enrichment. Each new project starts as first-of-a-kind, even when the design is 20 years old.
The political win on decoupling is immediate. The industrial win is conditional on whether the US can rebuild fleet-order continuity before the China gap compounds another decade. Thanks for the wonderful piece once again.
I am not sure if you are accurately attributing to Brad Setser what he is saying. For example, he writes: "China could not have achieved its current $800 billion trade surplus in goods if the United States did not have a large trade deficit. That deficit is no longer financed by the direct purchase of U.S. bonds by China’s central bank. But it is still indirectly financed by China, in the form of the large stockpiles of dollars that Chinese exporters now hold offshore. The way China surplus’s remains the mirror image of the U.S. deficit is just one of the many, complex forms in which the U.S. and Chinese economies continue to rely on one another, even as the ties become harder to see in topline economic data."
Basically he is saying what Michael Pettis has repeatedly written about, namely, that world trade is a closed system and everything must balance. You have to think systemically in such a system. Even if tariffs on China reduce Chinese exports to the USA, China will simply export to other countries and those countries will increase their exports to the USA, thus balancing the system. All that has happened is that the mix of exports to the USA has changed but the U.S. trade deficit stays the same to maintain balance in the system. I know Noah thinks the trade deficit is not an issue, but I disagree and find Pettis' arguments convincing. The trade deficit -- or what is causing that trade deficit -- has hollowed out U.S. industry and manufacturing jobs, and deindustrialized the U.S. economy and shifted the share of labor in the U.S. from producing goods in the tradeable sector to consuming things from others and low-end services. The point is the overall trade deficit, not whether we are specifically reducing imports from China since that is more or less irrelevant to the effect on our economy (although not irrelevant geopolitically). Until we can figure out how to eliminate or reduce our trade deficit and create more balance there, which must be done in a systemic way for the reasons Pettis explains, we will continue to suffer all the deleterious effects of China's mercantilist ways.
My wife worked for a global electronics company in Trump 1. They were early decouplers. When the first trade war happened they discussed it with their factory counterparts in China and they shifted production to Vietnam. Same factory owners, same parts suppliers, different country of origin.
A couple of years later the company itself was sold to a group of Chinese investors, who didn't change this arrangement.
Same with my father-in-law who sources safety wear from Chinese factories now doing the same from Chinese-owned factories in Malaysia
Soybeans? I wonder about Nvidia chips. Until proven otherwise, I presume that the most corrupt and damaging thing is what he wants to do. Tell me I'm wrong, I'd welcome that.
A certain someone did reportedly hitch a ride at the last minute.
So basically, assembly is leaving China, but the real story is in the data on intermediate goods. Even a "Made in Vietnam" iPhone still contains Chinese parts. Over the past decade, China has steadily shifted its focus to manufacturing components, processing minerals, and other upstream activities, while most people debated where products were ultimately assembled. Both countries are now using other countries to make their stuff, but we all know who controls the upstream resources better. Assembly may have moved, but the reliance on China remains.
You can count on an ignorant, not intelligent man who surrounds himself with sycophants, to continue to make stupid decisions.
By "stupid decisions" I mean harm to the USA economy and an opportunity to enrich himself and the Trump organization.
Other than the persistence of tariffs (and his belief in their effects), I do not see an over-arching economic plan for our nation from Trump 2.
He has always abided in the principle "use other people's money." As a business man, it was investors and taxing authorities. Now, it's just taxing authorities (the US Treasury).
He has an insatiable appetite for "feeling important" using gold, $$, and power as symbols of same.
As a trained observer of behavior, I can see that this appetite will NEVER be satisfied. Sad situation for all of us on the receiving end of his shite....
Nice article.... one think to keep in mind... the most valuable US exports are virtual IP (R&D designs, SW, AI models, etc) ... these are not well accounted for in GDP calculations and especially trade statistics.
Lots of good graphs of data in this piece. Interesting. I am not sure why it matters to the US where its imports are coming from. Are you saying it is safer for the US to import from a diverse group of countries? Is there a concern we should not import from China because we plan to fight a war with China? Why fight China? To defend Taiwan? To defend democracy? Americans do not care about either Taiwan or democracy.
Ironically, the war in Iran might temporarily tie us closer to China. We blew through a chunk of the missle stockpile. We need rare earth minerals. Guess what China has in droves…
Trump has always desired the autocratic trappings of Xi, but he was much more of a supplicant in their recent visit.
Great read
Look at Electrolux whose North American arm is faltering badly - it’s partnering with a Chinese manufacturing company (whose name escapes me) - I’m not clear on the details but eventually Electrolux will probably sell that part of the business to them and we’ll have fairly high-end Chinese appliances - that’s how china is trying to get out of low-end manufacturing - makes me very uneasy but my husband thinks I’m being paranoid - anyone have more expertise in this area?
Noah, the piece rings true on the political win; on the industrial side, it might take longer.
Vietnam will need a decade to graduate from FDI-led assembly to indigenous large-system building. Korea got there with Barakah. Vietnam will get there given enough time.
But on the American side, we long forgot how to build 100,000-ton ships, gigawatt-scale reactors cheaply, and HALEU enrichment. Each new project starts as first-of-a-kind, even when the design is 20 years old.
The political win on decoupling is immediate. The industrial win is conditional on whether the US can rebuild fleet-order continuity before the China gap compounds another decade. Thanks for the wonderful piece once again.
I am not sure if you are accurately attributing to Brad Setser what he is saying. For example, he writes: "China could not have achieved its current $800 billion trade surplus in goods if the United States did not have a large trade deficit. That deficit is no longer financed by the direct purchase of U.S. bonds by China’s central bank. But it is still indirectly financed by China, in the form of the large stockpiles of dollars that Chinese exporters now hold offshore. The way China surplus’s remains the mirror image of the U.S. deficit is just one of the many, complex forms in which the U.S. and Chinese economies continue to rely on one another, even as the ties become harder to see in topline economic data."
Basically he is saying what Michael Pettis has repeatedly written about, namely, that world trade is a closed system and everything must balance. You have to think systemically in such a system. Even if tariffs on China reduce Chinese exports to the USA, China will simply export to other countries and those countries will increase their exports to the USA, thus balancing the system. All that has happened is that the mix of exports to the USA has changed but the U.S. trade deficit stays the same to maintain balance in the system. I know Noah thinks the trade deficit is not an issue, but I disagree and find Pettis' arguments convincing. The trade deficit -- or what is causing that trade deficit -- has hollowed out U.S. industry and manufacturing jobs, and deindustrialized the U.S. economy and shifted the share of labor in the U.S. from producing goods in the tradeable sector to consuming things from others and low-end services. The point is the overall trade deficit, not whether we are specifically reducing imports from China since that is more or less irrelevant to the effect on our economy (although not irrelevant geopolitically). Until we can figure out how to eliminate or reduce our trade deficit and create more balance there, which must be done in a systemic way for the reasons Pettis explains, we will continue to suffer all the deleterious effects of China's mercantilist ways.