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Brad Setser
@Brad_Setser
, 10 tweets, 4 min read Read on Twitter
After two years of near non-stop discussion of trade with China, it is surprising to me that some basic facts about trade with China aren't better known.

The states that export the most autos to China for example.

The correct answer is South Carolina and Alabama (not swing states to my knowledge), the homes of BMW and Mercedes US operations.

S Carolina exports 2x as much to China as Michigan ... and that's most autos (+ perhaps some 787s)

census.gov/foreign-trade/…
We know that BMW and Mercedes export more cars (really SUVs) from the US to China than do Ford and especially GM

cnbc.com/2019/08/23/tes…
Ford and especially GM sell a lot of cars in China.

But that doesn't mean they make a lot of cars in the US to sell to China.

Their executives (and some of their engineers) care a lot about the Chinese markets. Their US workforce? Not so much ...
The Chinese auto market is deeply depressed right now, and that is hurting everyone in China (Ford in particular). But China's auto market (apart from the luxury segment) is a make in China to sell in China (and avoid China's tariff wall) market. It isn't a trade story.
& just as a trade war has losers (US soybean producers, US consumers), so would trade peace. With so much spare capacity in China, a true end to the trade and tariff war likely would tempt (per @KeithBradsher among others) GM and Ford to supply the US market from China.
@KeithBradsher That's what makes trade such a difficult issue --

The unionized auto workers in Detroit are not among those who stand to lose the most from a trade war with China, and they could lose from "peace"

While soy farmers and Wisconsin dairy farmers do stand to win from "peace"
@KeithBradsher Wisconsin's Department of Agriculture actually puts out detailed, up-to-date data on Wisconsin's agricultural trade with China ...

datcp.wi.gov/Documents/IABC…
@KeithBradsher But Wisconsin is also a big exporter of medical equipment, and it has lost out from China's "localization" policy (want to sell to China, better produce in China) for medical devices

census.gov/foreign-trade/…
@KeithBradsher which brings me to a point @econjared has made -- it is hard to know who will win and lose from a trade deal with China when Trump hasn't made it clear precisely what kind of deal he is seeking from China.

all for now
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More from @Brad_Setser see all

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Brad Setser
@Brad_Setser
The great profit shift.

There has been essentially no growth in the profits US firms report in the world's major markets (apart from the UK) over the last twenty years. All the growth in profits has been in a small number of low tax jurisdictions



1/x
According to IRS data (from a newish data), the average employee of a U.S. firms in Bermuda generated $50m of profits each year, the average employee in Caymans and BVI about $5m.

2/x
The majority of the US firms foreign profits (over $300b) is now booked in the world's corporate tax havens. And firms pay less that $15b in tax in these jurisdictions.

(back in 16 they still had a deferred US tax liability,not they owe the low US GILTI rate)

3/x
Read 9 tweets
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Brad Setser
@Brad_Setser
Kind of shocking how little FDI into the U.S. is actually greenfield investment (building new plants and the like).

To the first approximation, FDI is basically mergers and acquisitions ...

bea.gov/data/intl-trad…
Over the last five years, the official data shows only $60b in greenfield investment, and almost $1.6 trillion in acquisitions (including a host of inversions in 15-16).

25:1 ratio feels bank like (leverage ratios in the old days in the US, or Europe now ... )
Acquisitions obviously don't impact the economy in the same way that greenfield investment does.
Read 4 tweets
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Brad Setser
@Brad_Setser
We have about a year's worth of trade data since the trade war started. That's a period of fairly modest U.S. tariffs (25% on $50b, 10% on $200b). The tariffs also overlap with China's own 2018 policy tightening, which may well have mattered more than the trade war.

1/x
The y/y change in the trailing 12m sum is slow to move (it matches y/y data in December). But if you just look at China's imports of manufactures, I am not sure you would say "trade war" rather than "Chinese slump"

(and a semiconductor price cycle)

2/x
The export data by contrast screams trade war -- China's exports to the US are down, while its exports to the rest of the world (over the last 12ms v preceding 12ms) have held up OK.

3/x
Read 12 tweets

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