Despite pressure from the Biden administration to convince the European Union to do away with Chinese imports, the opposite seems to be happening. European countries have become more dependent on China in recent years, unlike the United States, which has gradually distanced itself.
In a blog published at the end of August, two researchers from the Peterson Institute for International Economics (PIIE), Mary Lovely and Jing Yan, clearly show that the United States has reduced its dependence on China for the manufactured goods it imports since 2018. The introduction of customs duties on approximately two-thirds of its imports from the country in 2018 and 2019 had a definite impact. At the same time, the European Union, Mexico and Canada have increased their presence in the American trade balance.
For imports of labor-intensive products (clothing, shoes, etc.), the United States has diversified its supplies, particularly in favor of Vietnam. For technology-intensive goods, such as iron, steel and transportation equipment, the United States has begun a shift in favor of Europe and Mexico. “The United States now depends almost as much on Europe as on China, with Mexico occupying third place,” the document states.
Europe is getting stronger in the United States
The trend is similar for purchases of aircraft, mobile phones or personal computers. The concentration of US supplies for these goods decreased between 2018 and 2023, due to a sharp decline in China’s market share and an increase in the European Union’s share.
Rhodium Group analysts, in a report published in early August, also note that “diversification is concentrated in a few sectors (textiles, electronics and automobiles) and in the assembly segment rather than in upstream supply chains.” For them, companies still depend on China for their production or their supplies of basic or semi-finished products. In short, a broader diversification of purchases will only happen in stages over a longer period. “Given that supply agreements reflect costly investments that only unwind over time, this suggests that China’s share of US imports could continue to decline,” predict the two PIIE researchers.
Europe and China interdependent
This is not the case for Europe, which has increased its dependence on China in recent years, with the opposite also being true. In short, there is no decoupling between these two commercial giants, notes the PIIE. The European Union alone supplies more than 10% of the total value of Chinese imports. Surprisingly, China is increasingly dependent on Europe for its imports of travel goods, handbags, shoes and clothing.
Europe, for its part, is becoming increasingly dependent on China as a supplier of manufactured goods. For example, it is seeing strong growth in Chinese exports of electrical machinery, including batteries and key components for electric vehicles. This has led to calls for market protection by the European Commission. Overall, the PIIE highlights that Europe had more diversified sources of manufactured goods imports than the United States in 2013, and again in 2018. The trend has now reversed. The EU and China have increased their mutual dependence on almost all types of goods.