U.S. Commerce Secretary Gina Raimondo began her visit to China on Sunday, aimed at bridging the economic gap between the two global superpowers.
China and the U.S. were once each other's largest trading partners, but today the U.S. has closer trade relations with its neighbors Canada and Mexico, while China engages more with Southeast Asia.
Analysts believe this marks a new trend of trade regionalization in the Eastern and Western Hemispheres, respectively led by these two superpowers, which could pose risks to global growth.
Neil Thomas, a China political analyst at the Asia Society Policy Institute, stated that the change in trade patterns shows both China and the U.S. are starting to shift their economic constraints towards trade. This could lead to a more pronounced regionalization of international trade, resulting in inflation and limited growth for other countries involved.
Following Trump's tariffs, the current President Joe Biden and some U.S. allies have limited exports of advanced semiconductors and their manufacturing equipment to China for security reasons. China has restricted the export of two metals used in semiconductor manufacturing.
U.S. officials have stated that Raimondo will convey a message that the U.S. does not seek to decouple from China but will protect its national security. Chinese officials have expressed their expectation to discuss challenges in bilateral trade.
Meanwhile, other factors are also affecting China-US trade. Higher U.S. interest rates have weakened demand, including for products from China, as the Chinese economy struggles due to weak domestic consumption, real estate issues, high debt, and overcapacity.
Data from the U.S. Census Bureau shows that bilateral trade volume in the first half of the year decreased by 19.6% year-on-year, about 67.6 billion dollars, while last year's trade volume reached a record high of 690 billion dollars.
The USMCA agreement, signed in 2020, is one of the factors contributing to this regionalization, while China joined the Regional Comprehensive Economic Partnership agreement signed with 10 Southeast Asian countries, Japan, South Korea, Australia, and New Zealand.
China has also applied to join one of the world's largest free-trade agreements - the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which was the successor to the Trans-Pacific Partnership (TPP). The Trump administration decided to withdraw from the TPP in 2017. However, China's accession to this Pacific trade group requires approval from all member countries, including U.S. allies.
Professor William Hurst of Cambridge University stated that the U.S. could exert significant pressure on Canada and Mexico not to agree to China's entry. These two countries value trade under the North American framework with the U.S. more than trade with China.
