China Has Found Permanent Substitutes For American-Sourced Goods
As President Donald Trump continues trying to strongarm China into a trade deal more beneficial to the United States, China is working to permanently replace American goods by sourcing from other markets, Axios reported earlier this month.
One of the trade war's most immediate U.S. victims is Maine lobster fishing, writes Bloomberg's Shawn Donnan. In line with Trump's tariffs, China slapped 25% levies on $128 million-a-year in U.S. lobster imports, and Maine's industry — cultivated over a decade and more — got hit.
China is now getting its lobsters from just across the border in Nova Scotia, according to the report.
Likewise, China has looked for ways to permanently substitute American imports of oil, soybeans and other goods:
- Last summer, China slashed U.S. oil imports and started to buy more from Russia and Saudi Arabia.
- It has all but halted purchases of U.S. soybeans, buying them instead from Brazil and Argentina. Brad Setser, an economist at the Council on Foreign Relations, said Russia could emerge as another soybean supplier.
- China very much wants to make and design its own high-end semiconductors as part of its aspirational Made in China 2025 program. For now, Khanna said a third of its high-tech imports come from U.S. companies. But it can begin to replace these from its Asian neighbors.
Axios noted that Trump is “said to want to decouple the U.S. and Chinese economies”, but trade experts have indicated it could be exceedingly difficult should he change his mind and attempt to resume trade with China.
“Once the U.S. loses the Chinese market for a product, it is unlikely to get it back even if this round of the trade war ends and tariffs are lifted," says Edward Alden, a trade expert at the Council on Foreign Relations. "This is both because it will establish new sourcing patterns, which tend to be sticky, and because Chinese buyers will not want to run the risk of future U.S. tariffs."