Shifting Trade Ties of the United States and China with Their Partner Countries: Changes Over the Five Years of Turbulence

Abstract

In this paper, we track the shifts in economic ties of the United States and China with partner countries in the context of commodity and service trade. We propose the grouping of major partner countries and regions: China, the US, North America (excluding the US), Europe, ASEAN, Chip 4 alliance countries (South Korea, Japan, Taiwan), India, and other countries. The dynamics of trade ties is broken down into three stages: active phase of the US-China trade war (July 2018 – January 2020); post-COVID recovery of the global economy (February 2020 – January 2022); geopolitical turbulence (February 2022 – present).

Regarding commodity trade, we document the changes in trade ties of the US and China with key groups of partner countries during each stage; apart, we examine the US trade in services with partner countries. A steady decline in commodity trade between the US and China was observed only during the third stage, while the drop during the trade war had turned out to be temporary. Trade in services between the US and China started to fall a bit earlier, during the second stage. At the third stage, the US commodity trade deficit with China declines in parallel with an increase in the commodity trade deficit with ASEAN, the Chip 4 alliance, and North America (partly due to reexported Chinese goods). In 2020, China has reached a record share in global commodity exports (about 16%) and continues to hold strong.

We propose the short list of countries and regions that may have the strong impact on growth and restructuring of world trade in the long term, in particular: China, ASEAN, North America, Russia, and India. The list relies on the following facts: retention of China’s extraordinary position in world trade even under the increasing pressure from the West; active integration and exceptional trade connectivity of ASEAN countries; significant efforts by the US to reintegrate North America and reshoring high-tech production back to the continent; Russia’s very high interest in developing cooperation within BRICS and decentralizing international payments; the rise of India as a major sales market.