By Freight Waves
America and China remain intimately intertwined via trade despite worsening tensions over Taiwan and the Russia-Ukraine war. More than a third of all U.S. containerized imports arrive from China. More than a sixth of China’s export value derives from U.S. purchases.
But there are growing signs of at least some decoupling. In recent months, America’s imports from China have fallen faster than total imports. Other Asian countries are increasingly taking U.S. market share from China, a trend that began before the pandemic and has continued.
Imports from China falling faster than total imports
According to new data from Descartes, U.S. containerized imports in October were flat (up 0.2%) versus September. But imports from China fell 5.5% month on month, by 45,071 twenty-foot equivalent units. The decline from China was entirely offset by gains from Thailand, South Korea, Taiwan, Japan and other countries.
In September, Descartes data showed a 12% plunge in total U.S. imports versus August. Imports from China fell faster: by 18% or 83,396 TEUs.
Chinese volumes accounted for 40% of all U.S. imports in August, and an even higher share — 42% — February. Last month, its share of U.S. imports was down to 35%.
Chris Jones, executive vice president of industry and services at Descartes, told American Shipper: “You can see that during the highly publicized lockdowns [earlier in the year], there was still a healthy flow of goods out of China.
“However, there were also highly publicized comments by major retailers and others saying that they were reducing their international purchases — largely out of China — and looking for alternate sources. And that is happening now.”
Bookings in China falling faster than total bookings
Data from FreightWaves SONAR shows that bookings for China-to-U.S. cargoes have slowed more than overall inbound bookings.
Throughout 2021, the index for bookings loaded in China was significantly higher than the index for all export destinations. The gap has narrowed since March and has now almost vanished, as the China-to-U.S. bookings index declined faster than the overall index.
Blue line: China-to-U.S. bookings as of date of departure. Green line: All U.S-bound bookings (Chart: FreightWaves SONAR)
Both indexes fell below 100 points this month (100 is indexed to bookings in January 2019). This implies weak volumes from China and other countries arriving in U.S. ports in December and early 2023.
Surprise decline in Chinese exports
On Nov. 7, the Chinese government announced October export results that were far below expectations.
Export value fell 7.5% versus September and 0.3% year on year. Economists polled by The Wall Street Journal had expected a year-on-year increase of 4%.
Export value to the U.S. declined 14% year on year, a much steeper drop than total exports.
Other Asian countries taking market share
The export data and Descartes import data point to a recent decline that may or may not be transitory. Another indicator — U.S. Census statistics on metric tons of U.S. imports — highlights a trend that’s been building for years.
U.S. imports from China were far higher than imports from other Asian nations in the years after the financial crisis. In 2009-2018, average import cargo tonnage from China during the first nine months of the year was 47% above average import tonnage from all other Asian countries combined.
But in 2019, imports from China were only 12% higher. In 2020-2021, amid the pandemic, imports from China were virtually even with those from other countries. In the first nine months of this year, the tables turned: Import cargo tonnage from China was 6% below imports from Asian rivals.
Monthly market-share data highlights how the move toward import diversification predated the pandemic.
In 2016-2018, China accounted for an average of 36% of U.S. import cargo tonnage, with the rest of Asia accounting for only 25%. China’s average monthly share was down to 31% in 2019, and the rest of Asia’s share had risen to 29%. In 2020-2021, they were even at 30% each.
In the first nine months of this year, China’s share remained at 30% and the rest of Asia jumped into the lead, with 32%.
Preparing for the future
“This started before 2022,” said Paul Bingham, director of transportation consulting at S&P Global, in an interview with American Shipper last month. “[Events] this year obviously added urgency and attention to this strategy — that at a minimum, companies need to diversify supply chains even if they’re not going to abandon China altogether.”
China Beige Book CEO Leland Miller said at this month’s FreightWaves F3 event: “You’re seeing certain sectors become very, very sensitive — things like technology and pharmaceuticals. These are being identified as areas that have to have supply chains pulled out of China as a national security issue. They are going to be pulled in the coming months, quarters and years.
“On the other side, you’ve got many things that are mostly economic and not considered as much of a security issue. For now, these are being identified as OK. But the line for this changes based on tensions between China and the U.S. Two, three years down the road — particularly if there are hostilities over Taiwan or the South China Sea or trade relations — that line continues to move, and there could be more and more pressure to pull supply chains out of China.”
Asked whether U.S. importers must seek alternative sources, Miller said, “I don’t think you can avoid doing that anymore. Because we know what the worst-case scenario is but we have no idea how close we’ll get to the worst-case scenario in the next five or 10 years. Will we have a war over Taiwan? Will the economic and trade side deteriorate even more? We don’t know how bad things could get. But we do know that not doing contingency planning is a very dangerous option.”