The brewing trade war between the US and China is based on old news, according to an analysis by BlackRock Investment Institute.
“The negotiations over the bilateral trade surplus with the US is, in many ways, fighting yesterday’s war,” said the report from the research arm of the world’s largest asset manager. President Donald Trump has pointed to the trade imbalance between the US (which exported $130 billion to the Chinese last year) and China (which sent $505 billion to the American market).
To trade economists, though, that is not a relevant comparison. For one thing, 30% of finished products from China have components from other nations, the US among them.
“The rise of integrated global supply chains means that traditional trade metrics are a less accurate measure of the balance of trade between countries,” BlackRock maintained. “Global supply chains have become critical inputs to global trade.”
Indeed, China is less export-oriented than it used to be, and the Beijing regime is making a big push to emphasize its domestic economy. ”China’s current account surplus has shrunk to below 1.5% of GDP from about 10% a decade ago,” BlackRock noted.
But none of this seems to be on the table, as the two biggest economies appear heading into an epic clash.