Thread by @Brad_Setser

I continue to find it helpful to compare the evolution of China's trade with Europe to China's trade with the US.

Europe exports a bit more (and its exports are titled toward manufactures) but otherwise it is a fair comparison

(note this uses China's data)

(1/x)

Using China's data has a set of trade-offs. It is more up-to-date (numbers through October). And it gets China's imports more or less right. But it misses a chunk of China's exports to the US (they show up as exports to HK)

2/x

Trump presumably likes this chart -- US exports to China are falling, but at a slower y/y pace than before. And US imports from China are now falling a bit faster than US exports (based on China's data)

3/x

That's because the base (for imports) has shifted down -- China didn't buy the US harvest last year. the y/y change thus is going to be a bit misleading.

(But the bigger story is that even before Trump China's imports from the US haven't really grown over the last 8ys)

4/x

the numbers on China's trade with Europe are in some ways more important, as they offer a cleaner read on trends in China's own economy. And, well, it still isn't pretty --

Imports from the EU are down y/y.

5/x

The fall in imports from Europe shouldn't be a function of chip prices, and any impact of the US tariffs on Chinese investment (hurts EU exports) should be offset by trade diversion toward Europe (tariffs on US goods).

Seems like a decent proxy for China's external demand

6/x

Indicators like this are why I largely agree with @BaldingsWorld. The slump in China's overall imports isn't just a function of the trade war.

7/7

bloomberg.com/opinion/articl…