America and China remain closely linked through trade, despite rising tensions over Taiwan and the Russia-Ukraine war. More than a third of all US container imports come from China. More than a sixth of China’s export value comes from US purchases.
But there are increasing 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 over US market share from China, a trend that began before the pandemic and has continued.
Imports from China are falling faster than total imports
US container imports were flat in October (+0.2%) compared to September, according to new data from Descartes. But imports from China fell 5.5% month-on-month, down 45,071 20-foot units. The decline from China was fully offset by gains from Thailand, South Korea, Taiwan, Japan and others.
In September, Descartes data showed a 12% drop in total US imports from August. Imports from China fell faster: by 18% or 83,396 TEU.
Chinese volumes accounted for 40% of all US imports in August, and an even higher share – 42% – in February. Last month, its share of US imports had fallen to 35%.
Chris Jones, Descartes executive vice president of industry and services, told American Shipper: “You can see that during the lockdowns that have become public knowledge [earlier in the year]there was still a healthy flow of goods from China.
“However, there were also high-profile comments from major retailers and others who said they were reducing their international purchases – mostly outside of China – and looking at alternative sources. And that’s happening now.”
Bookings in China are declining faster than overall bookings
Data from FreightWave’s SONAR shows that bookings for China-to-US freight have fallen more than total 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 is now almost gone as the China to US booking index fell faster than the overall index.
Both indices fell below 100 points this month (100 is indexed to bookings in January 2019). This implies weak volumes from China and other countries arriving at US ports in December and early 2023.
Surprising drop in Chinese exports
On November 7, the Chinese government announced export results for October that came in well below expectations.
The export value fell 7.5% from September and 0.3% yoy. Economists polled by the Wall Street Journal had expected a 4% year-over-year increase.
The value of exports to the US fell 14% year over year, a much sharper decline than overall exports.
Other Asian countries are taking over market shares
Export data and Descartes import data indicate a recent decline that may or may not be temporary. Another indicator – U.S. Census statistics on tons of U.S. imports – highlights a trend that has been developing for years.
US imports from China were far higher than imports from other Asian countries in the years following the financial crisis. In 2009-2018, the average import cargo volume from China in the first nine months of the year was 47% higher than the average import tonnage from all other Asian countries combined.
But in 2019, imports from China were only 12% higher. In 2020-2021, imports from China were practically par with those from other countries amid the pandemic. In the first nine months of this year, the tables turned: Imported freight tonnage from China was 6% below imports from Asian competitors.
Monthly market share data highlights how the import diversification move occurred before the pandemic.
In 2016-2018, China accounted for an average of 36% of US import freight tonnage, while the rest of Asia accounted for just 25%. China’s average monthly share had fallen to 31% in 20119 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 to the top at 32%.
preparation for the future
“This started before 2022,” Paul Bingham, director of transportation advisory at S&P Global, said in an interview with American Shipper last month. “[Events] This year has obviously brought more urgency and attention to that strategy – that companies must at least diversify their supply chains, even if they won’t abandon China altogether.”
Leland Miller, CEO of China Beige Book, said at this month’s FreightWaves F3 event: “You can see certain sectors are getting very, very sensitive – things like technology and pharmaceuticals. These are identified as areas where supply chains must be withdrawn from China for national security reasons. They will be drawn in the coming months, quarters and years.
“On the other hand, there are many things that are mainly economic in nature and are not viewed as much as a safety issue. At the moment these are identified as OK. But the line for this is changing due to tensions between China and the US. Two, three years later – especially if there’s hostilities over Taiwan or the South China Sea or trade ties – that line is moving further and there could be more and more pressure to pull supply chains out of China.”
When asked if U.S. importers need to look for alternative sources, Miller said, “I don’t think you can’t avoid it anymore. Because we know the worst-case scenario, but we have no idea how close we’ll get to the worst-case scenario in the next five or ten years. Will we have a war over Taiwan? Will the economy and trade side deteriorate any more? We don’t know how bad it could get. But we know that not doing contingency planning is a very dangerous option.”
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