Over the last two years, there has been a drop in U.S. imports from China, the result of an ongoing political battle that has resulted in tit-for-tat retaliation nearly every quarter much to the dismay of shippers around the world. But, the newest data reveals that this drop in imports has accelerated in 2020, particularly the first four months of the year when the Coronavirus severely impacted the relationship between these two countries.
China’s Market Share of US Imports
For the first four months 2020 China’s market share of US imports was 55.7%. On its own this seems quite impressive however when compared to the same timeframe in 2019, it represents a substantial decline of 7.8 percentage points. At the same time last year, China’s market share was 63.5% compared to its 55.7% now. China’s share of US Imports for the whole of 2019 was 63.8%. In 2018, just one year prior, that market share was 69.1%. The overall drop between 2018 and 2019 was indicative of serious political battles that had ramifications on the marketplace and now when the outbreak of COVID-19 has been tossed into that already tumultuous mix. No doubt the figures will be even more drastic when 2020 comes to a close and is compared to 2019. The figures for the first four months of the year already paint a very drastic picture of significant decline unless something political changes very quickly. That decline will no doubt continue for the rest of the year.
Even though the United States has decreased its purchases from China and accelerated import sourcing from elsewhere, the US Imports that are no longer tied to China have at least remained local to Asia. Vietnam has the main beneficiary. Slowly but surely over the last few years, and especially the last few months, there has been a slow migration to other Asian countries like Thailand, Singapore, Cambodia, Indonesia, and Malaysia. However, none of these countries can compare to the pace of Vietnam in taking over the lost market share from China. Vietnam saw a leap of 3.5 percentage points in terms of its market share for US Imports out of Asia. South Korea followed behind Vietnam in terms of its increase, gaining 0.09% of the market share.
Shifting Production Trends
The combination of the trade war between the United States and China, as well as the outbreak of the coronavirus, has resulted in a shift of production and sourcing. Products like footwear and electronics have been slowly migrating to Vietnam over the last few years the country has made itself a leader for developing inland transportation infrastructure, port transportation infrastructure, and workforce training. Carriers have taken notice and added additional trans-pacific services through these ports in Vietnam, which it’s share of imports from the United States is up 8.9% from the same time last year.
Vietnam is not alone. Other Southeast Asian countries have expanded their manufacturing as well albeit at a slower pace. During the first four months of 2020, Thailand saw an increase in its share of US imports by 0.08%. Indonesia saw an increase of 0.05 percentage points. Malaysia saw the same increase as Thailand while Singapore and Cambodia saw an increase of 0.02 and 0.03 percentage points respectively. Even the Philippines enjoyed a flat, level share of US imports. The United States is moving from China to all of its neighbors for its production.
Effects of the U.S – China Trade War
The trade war between the United States and China has been ongoing since the second half of 2018 and well into the entirety of 2019. There were four different occasions when the Trump Administration issued tariffs and retaliatory responses were felt around the world. Shippers had hoped that the Chinese New Year and the start of 2020 would bring with it changes to this political battle and the negative impact it was having for imports and exports. Unfortunately, the outbreak of the Coronavirus, originating in China has led to a series of even more stringent repercussions economically. When the Chinese economy was halted, manufacturing plants closed temporarily, and the pandemic was still spreading, shippers needed to find resources anywhere they could, including necessary medical equipment and protective gear like gloves and masks which had to be sourced and shipped from somewhere else along the periphery. As China has opened back up, people are still relying on shipments from elsewhere, causing these figures for import sourcing from China to drop continually.
Not only is the Trump administration and the shipping industry as a whole now dealing with the continued trade war but companies are much more reluctant to use China for manufacturing or shipping. Cargo needs to move safely and quickly but the outbreak of the Coronavirus resulted in many operations being severely hindered, if not stopped entirely. Countries like Japan are stopping all cargo flights to places like the United States, airlines are converting as best they can from passenger flights to cargo flights, all in an attempt to find alternative routes for goods. Add to this the fact that shippers are moving away from China as a result of the Chinese economy being halted during the first few months of the outbreak, and it is easy to see how things are spiraling for Chinese and US imports.
Overall it seems that the United States is continuing to accelerate its import sourcing away from China and towards nearby Asian countries, particularly Vietnam. The ongoing trade war between the United States and China has caused a severe decline in China’s market share of US imports for the last 2 years. China’s market share is now decreasing faster as a result of the coronavirus outbreak and the shifting limitations of different governments, manufacturing, and the production of goods.