Thread by @Brad_Setser

. @ChadBown has noted that China is cutting tariffs on others a bit even as its retaliatory tariffs on the US rise. That's no doubt true

But I still want to add a couple of points of caution -- largely b/c China remains a relatively closed market

(1/x)

https://twitter.com/economistmeg/status/1140975169353199619

First point of caution -- China's market isn't quite the prize it is often made out to be, at least not for manufacturers. China's final demand is maybe a third that of the US (lots of China's imports are for re-export)

(2/x)

Second caution. China's market for manufactures isn't growing that fast. if you take out imports of semiconductors (mostly for re-export, and China doesn't want to import them long-term) its imports of manufactures have grown more slowly than those of the US since 12

Third caution. China's surplus in manufactures is over $900b (v non-processing manufactured imports of ~ $600b, e.g. v manufacturing exports net of processing of over $1.5 trillion) and has been growing not shrinking (largely b/c of weak imports)

Fourth caution. Even with reduced tariffs, China aims to displace many high-tech imports from its market over time. China 2025's stated goals including reducing China's imports of chips, aircraft, medical equipment and agricultural machinery ...

This all may be changing. China may be opening up. & Trump clearly is trying to reduce US imports (even if his fiscal policy pushed in the other direction).

But for now, I suspect there are limits for China to create friends by agreeing to buy more of their manufactures ...

China of course is a huge and growing market for commodity producers of all kinds & it has developed a unique capacity to fund infrastructure investment through the CDB and China exim ...

But it still isn't a great market for others' manufactures imo