How the US–China Trade Conflict Affected China’s Trading Patterns

The trade conflict between the US and China has led to tit-for-tat tariff increases imposed on a significant portion of their respective exports since it started in 2018. The US increased tariffs on Chinese exports from 3.1 percent in early 2018 to 19.3 percent by 2020, affecting around 66.4 percent of China’s total exports. In response, China raised tariffs on US exports from 8.0 percent at the start of 2018 to over 21.1 percent by 2020, impacting approximately 58.3 percent of US exports. These barriers not only influenced bilateral trade, output, and inflation, but also have a lasting impact on trade patterns.

The US has historically been China’s primary export destination, a dynamic that has shifted notably since the trade conflict began. Although the shift was temporarily reversed by the COVID-19 pandemic, the trend persisted downward after 2021, which consequently reduced the US’ importance as China’s primary export partner. China’s exports to the US, as a proportion of its total exports, has decreased by over three percentage points from 2018 to 2022—equivalent to about USD102 billion, or 0.57 percent of China’s GDP, in 2022. This was accompanied by a decline in its contribution to China’s overall export growth. The downward shift was also evident in China’s exports to Hong Kong, China, which serves as an entrepôt for goods destined for the US.

However, increases in exports to the European Union (EU) and ASEAN have compensated for the decline in China’s export share to the US. An increase in China’s export share to the EU indicate a shift toward alternative markets that share similarities with the US in terms of income levels and consumer preferences, while ASEAN has grown to become China’s key partner for exports.

A similar pattern has been observed for China’s imports from the US. Imports from the US has declined since 2019, despite a resurgence during the pandemic between 2020 and 2021. This has reduced the share of US imports within China’s overall import portfolio, and adversely affected China’s overall import growth.

Increased imports from ASEAN, however, have made up for the shortfall in China’s import share from the US, and solidified the region as its primary source of imports. This corresponds with the simultaneous increase in foreign direct investment flows from China into the ASEAN region.
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