Chinese Exports to the U.S. Get a Lifeline From Coronavirus-Related Demand

Date: Monday, October 12, 2020
Source: The Wall Street Journal

Chinese shipments of virus-related goods to the U.S. have helped the country offset sharp drops in its top export categories due to Washington’s tariffs and the global economic downturn.

The trade pact the U.S. and China signed in January left in place U.S. tariffs on about $370 billion in Chinese goods, roughly three-quarters of the country’s exports to the U.S. Nonetheless, China’s exports to the U.S. have increased in recent months, a resilience that has surprised economists.

U.S. Census data released Tuesday showed that of the top 10 categories of Chinese exports to the U.S. in 2019, eight showed sharp drops this year through August.

Clothing exports dropped 46%, footwear fell 40%, while furniture and toys fell 26% and 22% respectively. Together these products made up about one-fifth of the country’s exports to the U.S. last year. Electric machinery including audio and TV equipment, China’s top export category to the U.S. last year, dropped 19% in the first eight months compared with the year-earlier period.

Almost all of these wares have been targeted by punitive Trump administration tariffs, though some items have been granted exemptions.

Despite the sharp drops, China’s total exports to the U.S. were down by only 3.6% in the first eight months from the same period in 2019, Chinese official data showed. As China bounced back from pandemic lockdowns earlier than the rest of the world, activity picked up. In July, exports to the U.S. jumped by 13% from a year earlier, followed by a 20% rise in August. September figures aren’t out yet.

But another important factor was virus-related demand. Personal-protection equipment and electronic devices related to working from home, such as laptops, accounted for about two-thirds of the export growth in July and August, said Rory Green, a Seoul-based economist at research company TS Lombard.

His estimates are based on a product breakdown covering medical equipment, electronic devices and a subcategory of textiles that includes cloth masks. Based on those categories, between March and June, the only growth came from pandemic-related demand, he said.

China’s exports globally has benefited both from its ability to reopen factories faster than other countries, as well as its ability to provide massive amounts of the products needed to fight the coronavirus. The country posted a 9.5% rise in outbound shipping in August compared with the previous year.

The global lockdowns “played to China’s manufacturing strength,” said Mr. Green. U.S. tariffs exemption on medical goods from China also helped.

The president of an East Coast-based import firm, which for decades had been importing Chinese products from vacuum cleaners to toys, has found himself hampered by tariffs of up to 25% on Chinese goods, though he has managed to get tariff exemptions on a number of items. This year, he started importing personal-protection products from China for the first time. He declined to say how big a part such products are of his imports now.

U.S. Census data showed that a textile category of Chinese exports to the U.S. that includes face masks rose 156% in the first eight months of this year. Stripping out other items in the category shows cloth masks surged 465% in the period.

In March, Scott Rein, president of Western Medical Consulting & Supplies LLC, which provides medical expertise to Chinese entities including hospitals, suddenly found himself in the business of importing Chinese medical products to the U.S. He had returned to his home in Utah late last year from Shanghai. When the pandemic struck, he couldn’t go back and his business closed.

With an acute PPE shortage as the virus spread widely in the U.S., Mr. Rein said his company managed to purchase more than four million masks, hand sanitizers and other personal products from China. He sold most of it directly to hospitals. Still in the U.S., he is now selling Chinese masks and hand sanitizers directly to consumers.

Once pandemic restrictions ease, and stimulus money dries up, the spending on Chinese products is likely to wane, said Mr. Green of TS Lombard. He expects Chinese overall export growth to come in around 5% in the year’s second half.

Some former Chinese officials cautioned against reading too much into the export momentum. In a September essay, Zhang Yanling, a researcher at the Chongyang Institute of Financial Studies, a Beijing-based think tank, wrote that it was evidence of the resilience of the Chinese economy in the face of a pandemic, but called the future uncertain given the U.S.-China relationship.

The East Coast importer plans to continue buying PPE from China. In his experience, U.S. manufacturers that have tried to get in on the pandemic demand can’t compete with Chinese companies on price or production capability. “Until they do, people don’t really have a choice,” he said.


[Read from the original source.]