Gobbling China’s exports, US sinks into dependency ---- Illustrating the state of America’s supply chains, orders for US-made manufacturing equipment are at 1992 level

asiatimes.com ^ | October 14, 2021 | David P. Goldman

[elpadre]

China’s exports rose 28% in September from the year-earlier level, more than the analyst consensus had forecast. More important is that China’s exports to the United States have risen by 31% since January 2018, when President Trump imposed tariffs on a wide range of US imports from China. At a seasonally adjusted annual rate, the US is buying $635 billion of Chinese goods, equal to a staggering 27% of US manufacturing Gross Domestic Product.

That’s the sort of import dependency economists associate with Third World countries dependent on former colonial powers. US exports to China during the past 12 months were only 30% of China’s exports to the US.

During the same period, China’s exports to South Korea rose by 50%, to Taiwan by 60%, and to Germany by 61%, but China imports almost as much from these three countries.

Demand for Chinese goods after the pandemic disruption has strained China’s production capacity, contributing to a power shortage that is now forcing cutbacks in key industries, including computer chips.

China came out of the COVID-19 epidemic faster than any other large industrial country, and suffered less disruption to its productive capacity. That explains part of the increase of Chinese exports to the US despite a 20% tariff on about half of all goods sold to America.

The poor condition of America’s supply chains is another part of the story. Orders to US manufacturers for manufacturing equipment, for example, languish at the level of 1992, at just half the 1999 peak.

The Trump corporate tax cut of 2018 reduced incentives to invest, cutting depreciation allowances for capital equipment in order to pay for a lower basic corporate tax rate. In response, US corporations in 2019 spent more money buying back their own stock than on capital expenditures, (charts at link)

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