LONDON, Feb 14 – Despite the geopolitical tensions of recent years, globalization shows signs of adaptability rather than retreat. Supply chains, for instance, have shifted instead of reverting to domestic operations, and the impact on overall trade volumes has been less severe than anticipated. The trading relationship between the United States and China has notably changed due to six years of reciprocal tariffs, pandemic-related uncertainties, and intensified political and investment disputes following Russia’s invasion of Ukraine.
The onset of the trade tensions can be traced back to early 2018 when former U.S. President Donald Trump initiated a tariff war on Chinese imports, leading to a significant decrease in China’s export market share in the United States from 21.6% in 2017 to 14% in the previous year. The Biden administration has continued to emphasize reducing dependence on Chinese trade through a strategy of ‘de-risking,’ especially as geopolitical tensions have escalated concerning Taiwan and Ukraine.
This shift is evident in the change of the leading exporter to the United States, with China relinquishing its top position to Mexico in 2023 after 16 years. The potential return of Donald Trump to the presidency and his proposed increase in tariffs on Chinese goods suggest that a reconciliation of direct trade ties may not be imminent.
A report from the Boston Consulting Group (BCG) predicts a further deepening of the rift between the two largest global economies, anticipating a nearly $200 billion decrease in bilateral trade over the next decade, a significant increase from previous forecasts. Despite these challenges, the broader implications of a move towards ‘de-globalization’ have not materialized as feared.
Analysis from Stephen Jen and Joana Freire at Eurizon SLJ Capital indicates that the proportion of global cross-border trade relative to global output has remained stable, with the current share of non-oil trade to GDP staying within the ranges seen over the past 20 years. Furthermore, China maintains its position as the world’s leading exporter, holding a 15% share of global exports.
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