US goods and services imports from China last year were the highest ever recorded. Measured in current dollars, US goods imports alone from China rose 6 percent relative to 2021 (panel a), reaching the second highest level on record. Goods imports nearly returned to 2018 peak levels.
At first blush, this increase would seem puzzling. It runs counter to the expected "decoupling" of US-China trade, in which the United States would be buying fewer imports from China and more from the rest of the world. US tariffs introduced during President Donald Trump's 2018–19 trade war remain in place, despite the January 2020 US-China "phase one" agreement. The Trump tariffs continue to cover roughly two-thirds of US goods imports from China, or over $300 billion, when measured against 2017 trade levels.
In part, this puzzle can be resolved by examining US imports from China of three different sets of products. Each set faces different tariff levels stemming from President Trump's trade war (panel b).
In 2022, Chinese imports of products still facing trade war tariff rates of 25 percent remained nearly 25 percent lower than their pre-trade war levels (the 12 months ending in June 2018). Especially for these products—on Lists 1, 2, or 3—US-China trade is indeed starting to decouple, as US imports from the rest of the world were 40 percent higher over that same period. Chinese products subject to these 25 percent US tariffs include semiconductors, furniture, IT hardware, and some consumer electronics.
At the other extreme are US imports of Chinese products never hit with trade war tariffs. US imports of these goods from China were 42 percent higher in 2022 than in the 12 months prior to the trade war. The value of these imports has grown so much that they nearly outweigh the decline in imports from China of products hit by the trade war tariffs (see panel a), explaining why overall US imports from China are reaching new heights. There are few signs of decoupling for imports of many of these products. (Imports from the rest of the world are only 38 percent higher over the same period.)
Interestingly, US imports from China of these products are higher in part because of the consequences of a policy decision President Trump made in August 2019. He was worried that his pending tariff action would cause prices to increase for these particular goods—referred to at the time as List 4B—and ruin the holiday season for American consumers. In reference to the imposition of new tariffs, Trump stated "we have delayed it so that they won't be relevant for the Christmas shopping season." The tariff delay would turn out to be permanent when the trade war shortly thereafter ended.
The products that received a tariff delay included toys, video game consoles, smartphones, laptops, and computer monitors. However, demand subsequently increased sharply for imports of these goods in 2020–21 due to the COVID-19 pandemic, contributing to the import boom. The combination of social distancing with lockdown policies resulted in people staying at home. They shifted purchases away from services (e.g., vacations, restaurants) toward consumer goods, and especially computer equipment to work or school from home, as well as video games and toys to entertain their families.
A third set of imported products from China—those that President Trump decided to hit with tariffs in the fall of 2019, and referred to as List 4A—also continues to face trade war tariffs, but at a much lower tariff rate of only 7.5 percent (panel b). In 2022, US imports of those products from China remained 8 percent lower than their levels before the tariffs went on in September 2019. With 46 percent higher imports from the rest of the world over that same period, the United States has begun to shift sourcing of some of the products—such as clothing and footwear—to third countries. However, for some products, that new sourcing trend pre-dated the imposition of the trade war tariffs and was happening for other economic reasons.
This PIIE Chart is based on Chad P. Bown's Trade Talks podcast episode, US-China trade war fallout: This is what decoupling looks like. See also Chad P. Bown's October 2022 blog, Four years into the trade war, are the US and China decoupling? For US exports to China, see Chad P. Bown, and Yilin Wang's March 2023 blog, Five years into the trade war, China continues its slow decoupling from US exports.
1. According to data from the Bureau of Economic Analysis, total US goods and services imports from China in 2022 were $564 billion; in 2018 they were only $558 billion. Total US goods imports alone from China in 2022 ($537 billion) remained slightly below 2018 levels ($539 billion) according to data from Census.