It is a bit hard to believe that any story involving China has been underreported, given China's large role in the global public debate.
But China's transformation into a major auto exporter has been wildly underreported.
(see the hockey stick in exports of finished cars)
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China has gone from a large net importer of finished (mostly from the EU, the Japanese firms never thought they could sell in China w/o producing in China) to a net exporter remarkably quickly ...
(China has been a net exporter of auto parts for some time)
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The US has long been a net importer of autos (mostly from Japan and Korea, but to a degree from Europe too).
And the EU has long been a net exporter of autos.
China has suddenly become a major global competitor
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I suspect that you need a Ph.D in political science -- or perhaps psychology and trade law :) -- to understand why the Commission's main response to a surge in Chinese competition (primarily in EVs) has been to threaten to challenge the US in the WTO ...
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I do understand that the IRA discriminates against European EV exports to the US (there aren't very many yet & the EU EV market is also undersupplied & will absorb any lost sales)
But the big swing in global demand for EU autos right now is coming from China, not the US.
5/5
this thread was inspired both by this Bloomberg story, and the EU's current freakout over the IRA (& its long silence over China's obviously discriminatory policies in the EV sector, which have had a much bigger impact on EU auto exports and employment)
A bit of work in progress. The net foreign assets of China's state commercial banks doesn't include the net foreign assets of the policy banks. So I converted net "other" in the BoP into a monthly series, and plotted it against net foreign assets.
Good fit
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The gap between the cumulative flows since 2010 in the two series (mostly from 2014 to 2018) implies ~ $1 trillion in net foreign assets in the policy banks, consistent with the work of @AidData
Note this is an upper bound estimate in some ways.
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@AidData Throat clearing: net other is defined as net loans, net deposits and net trade credits, and then I added portfolio debt assets b/c the state banks hold a lot of foreign bonds (including all of the bonds makes it an upper bound estimate)
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US imports of pharmaceuticals from the world's low tax jurisdictions have more than tripled since the (Pharma) Tax Cuts and (Irish) Jobs Act was passed ...
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The US trade deficit in pharmaceuticals has gone from $50b to around $200b (close to 0.7 pp of US GDP)
I liked Trump's term one trade policy a lot better than Trump's current trade policy.
Back then, the bulk of the tariff increase was on goods from China.
Now, not so much
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Gearing up for the May trade data release
In April, tariff revenue was around $20b, equally split between China and the rest of the world.
During Trump's first term the increase in monthly tariff revenue (to $5/6b) was essentially from tariffs on China going from $1b to $4b
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Tariff revenue from countries other than China, for future reference ...
Taiwan so far has gotten off relatively lightly, largely b/c of the semiconductor exclusion from the reciprocal/ base tariffs (expected future 232 sector)
Foreign demand for US bonds was a bit too strong in 2023 and 2024; it has pushed the dollar up to untenable levels.
But there is a some risk of a real reversal now
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Not sure that Trump's comments over the weekend about the future path of US rates (and issuing bills until he installs a compliant Fed chair) will increase global appetite for US bonds
Just a reminder that Saudi Arabia runs a current account deficit these days -- and its break even oil price (for the balance of payments) is around $90 a barrel ...
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The latest balance of payments data only runs though q1 -- but the difference between the oil price and Saudi's breakeven implies a much larger deficit in q2 than in the past few quarters
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Saudi external asset accumulation over the last 4 quarters has been financed by debt, not out of its oil proceeds
One of the surprises of the first half of the year was that China held the yuan stable even in the face of significant new US tariffs.
China's q1 BoP data helps explain why -- China was in a quite strong underlying position
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in the past few quarters, China's reported current account surplus jumped up to $150b a quarter (it is still understated, I think it is really ~ $200b a quarter) and the state banks have added $50-100b a quarter to their foreign assets.
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The balance of payments signal from China's state bank flows (plus PBOC flows) isn't as strongly as in 2020 and 2021, but it has been pretty consistent ...