Headlines often tell us that the US is reversing globalisation, but this chart focused article succinctly shows that in fact China is to blame. Senior Fellow Brad Setser compares GDP growth with trade openness. Typically, economic development is associated with more openness. This was certainly the case with the US, but it hasn’t been so with China – their imports have lagged…
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Headlines often tell us that the US is reversing globalisation, but this chart focused article succinctly shows that in fact China is to blame. Senior Fellow Brad Setser compares GDP growth with trade openness. Typically, economic development is associated with more openness. This was certainly the case with the US, but it hasn’t been so with China – their imports have lagged. That’s no surprise, though, since the government isn’t shy about its import-substituting industrial policy. It aims to not only bring production of foreign firms home, but also intends to build local indigenous industries. Trump, on the other hand, is disrupting these efforts partly by reversing dollar strength to boost US exports.
Why does this matter? We need to watch China’s industrial policy to understand the scale and pace of de-globalisation. For now, at least, it appears to be accelerating, which suggests that Chinese growth will provide less support for trade partners.
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)