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Interesting @petersgoodman look at the political impact of the China shock on left-wing industrial strong holds in Italy.

h/t @toddntucker

nytimes.com/2019/12/05/bus…
@petersgoodman @toddntucker Stefano Federico has a paper documenting the impact of the China shock on manufacturing intensive part of Italy -- Italy's greater exposure to the first stage of the China shock than say Germany is part of the reason for Italy's stagnation.

ideas.repec.org/a/bla/obuest/v…
@petersgoodman @toddntucker Germany though would be highly exposed to a China shock in autos -- or certain kinds of high-end machinery. And Italy's experience suggests an older labor force in particular has trouble adjusting.
@petersgoodman @toddntucker And there is evidence that the China shock had an impact on parts of France as well, though the impact was tempered by the fact that France's economy is less manufacturing driven than Italy's (and aircraft haven't been hit by a China shock, yet)

publications.banque-france.fr/en/impact-chin…
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Brad Setser
@Brad_Setser
The market's attention is all on deal or no deal.

But there should be no doubt that China maintains a host of discriminatory policies. I have long thought "buy Chinese" import substitution policies should be a bigger U.S. priority for example.

ft.com/content/b55fc6…
The U.S. export limits no doubt have accelerated China's efforts to displace imported components from its supply chain. But the push "to increase China’s reliance on home-made technologies" predates Trump's trade war (it is all over China 2025)

2/x
And it isn't clear if this new policy is actually a WTO violation -- at it seems "buy China" requirement isn't formally a law, but rather a directive from the Party.

3/x
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Brad Setser
@Brad_Setser
The idea that China is heading toward a current account deficit is increasingly becoming a zombie idea. It persists no matter what is actually in the data.

China's goods surplus in 19 will be around $430b, up ~ $80b from 18 ...

The goods surplus of course isn't the same as the current account balance. But the CA generally moves with the goods balance (except when China revised the services trade data). And with the November trade numbers, we more or less know the 19 goods surplus.
The rise in the goods surplus stopped in November (more or less flat imports and exports y/y). But in dollar terms it has stabilized a level well above its 17-18 levels (let alone its 10-13 levels).
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Brad Setser
@Brad_Setser
The basic idea that Trump's trade strategy has shown that it is easier to shift trade away from China than to bring down the overall trade deficit is clearly right.

But also need to recognize that the non-oil trade deficit stopped rising this year. Peak was in late 18.

1/x
Non-petrol trade deficit rose from under $700b to over $900b in Trump's first two years, thanks to the stimulus and relatively limited tariffs. It looks to be flat to down over the course of this year -- thanks to the recent slide in imports (and slower US growth)

2/x
Imports of manufactures have been very weak. Some of that's the inflated base from last year (beat the tariffs). some of that is the GM strike (weak auto parts imports). But some is the last round of tariffs.

3/x
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