NEW YORK – US imports from China rose to an all-time record after seasonal adjustment in April, despite the Shanghai lockdown and other Covid-related blockages in the Chinese economy.
That isn’t what you read in Bloomberg News, whose 30 economists and 100 full-time economics reporters apparently haven’t learned the difference between seasonally adjusted and unadjusted data.
Unadjusted, the data show a typical bouncing-ball pattern over a 12-month cycle. It is meaningless to make month-to-month comparisons without taking into account the pronounced seasonality of trade patterns.
The chart above reflects seasonal adjustment performed on the Eviews econometrics platform using the TRAMO algorithm, the approach employed by most central banks.
Wrote Bloomberg June 7: “The US trade deficit shrunk in April by the most on record in dollar terms, reflecting a drop in the value of imports amid Covid lockdowns in China while exports climbed. Imports dropped in April as factory activity in China fell to the lowest level since February 2020 amid strict lockdowns to curb the spread of Covid-19. While manufacturing in the country has improved somewhat since, the measures are still straining already-tenuous global supply chains, especially when coupled with Russia’s war in Ukraine. The deficit with China decreased in April by $8.5 billion, the most in seven years. Imports dropped $10.1 billion, also the most since 2015.”
The important story is the diametric opposite of Bloomberg’s report: Despite the Covid lockdown, China’s economy continued to export more than ever to the United States. What we observe in the data is the resilience, not the fragility, of the Chinese economy, and the ever-growing dependence of the United States on Chinese manufacturing.
It is noteworthy that before the Trump tariffs went into effect, China’s own reporting of its exports to the US was consistently lower than US reporting of its imports from China, probably because Chinese exports underreport export earnings in order to squirrel away funds in overseas accounts. After the Trump tariffs went into effect in August 2019, however, China’s export numbers exceeded US import numbers.
In a June 2021 study, the Federal Reserve Board of Governors explained the switch:
“The United States’ bilateral goods trade deficit with China appeared to have narrowed substantially since the escalation of the US-China trade conflict in 2018, or so US trade data suggest. By contrast, the Chinese data tell a much different story: The deficit, as implied by China’s bilateral surplus, nearly reached historical highs by the end of 2020.
“Historically, the discrepancy between these trade balance figures had remained fairly predictable and stable. But with the onset of the trade conflict, US-reported import values from China have fallen more sharply than the China-reported export values to the United States. Two reasons are likely responsible for this phenomenon: (1) US importers underreporting Chinese imports in order to evade US tariffs, and (2) Chinese exporters reporting higher exports due to changes in tax incentives in China.”
Follow David P Goldman on Twitter at @davidpgoldman