China Esquire

In case you haven’t heard, China officially became the top U.S. import source. It perfectly addresses a question I received about my analysis on the Trader Joe’s boycott (see here).

In light of the Trader Joe’s boycott, I posed the suggestion that consumers in general, particularly the WalMart types, are not about to abandon Chinese products en masse just because a boutique food outlet does. They cannot afford to do so. Let me post a question I received:

I think that things will start to get interesting if shoppers at chain stores begin to organize boycotts of Chinese products, which is something that could happen — and has, in small ways — even *if* QC improves. This is slightly different from your point about “America abandoning Chinese products en masse.” As you said, the business import-export relationship is too tight (fun fact that I just learned: Wal-Mart, one of the stores you mentioned, imports an estimated $15 billion worth of Chinese goods a year, and this # is steadily increasing) for trade to take a hit, but it’s possible that we could see a big change in consumer attitudes later that just might add up to something.

Or maybe that’s too unlikely; perhaps competitive prices will continue to win hearts at the end of the day. What do you think?

My thoughts: while I do believe there is some growing resentment against China by the average consumer, given people’s penchant for saving money plus market forces (or at least the media) saying that a recession is coming, I don’t think there can be any real boycotting against Chinese products. I think the looming recession is going to be the single biggest factor for most consumers. People are already tightening their belts and getting ready for the long haul, which means reliance on Chinese products.

I think the other problem is that our economy is too tied up with Chinese products. We simply cannot unring the bell–and American companies and other multinational corporations know this. If its not China, then it will be Vietnam, India, or some other place. But I don’t think we’ll ever go back to “Made in the USA” as good as it sounds.

If that wasn’t enough, a Bloomberg article ( h/t China Digital Times) stated that China imports are still on the rise such that China just became the largest importer into the U.S. and bypassed Mexico as the second largest trade partner. That says a lot. From the Bloomberg article:

China passed Canada to become the largest source of products shipped into the U.S. last year, capping a six-year period when its exports to the U.S. more than tripled.

Led by items such as flat-panel televisions and computers, household appliances, toys and clothing, imports from China surged to $321.5 billion in 2007, according to a Commerce Department statement today. Chinese trade is accelerating faster than imports from Mexico after the North American Free Trade Agreement took effect in 1994.

China’s ascension may lead to a backlash in Congress, where lawmakers accuse China of undervaluing its currency, producing unsafe products and providing its industries with subsidies that allow them to undercut American-made goods.

“This is a surprise, and it will be a bit of a ding-dong for the Congress,” said Gary Hufbauer, an economist at the Peterson Institute for International Economics in Washington.

Yet, the burgeoning Chinese imports have benefited the U.S. by lowering prices and expanding choice, advocates say.

“Consumers are getting lower prices for a wider variety of goods,” said former U.S. Trade Representative Rob Portman.

China also passed Mexico last year to become the second- largest trading partner with the U.S. after Canada. As recently as 2002 Mexico sent more goods to the U.S. than China. Now, Chinese totals are 50 percent more than Mexican exports to the U.S. The rise of China doesn’t mean trade with Canada is falling: imports from Canada increased 3 percent last year, despite the rise in the Canadian dollar. Imports from China jumped 12 percent compared with 2006.

Chinese exports to the U.S. were rising steadily through the 1990s. They spiked after China entered the World Trade Organization in December 2001 and after global caps on apparel trade expired at the end of 2004.

I suppose we aren’t going back to Kansas anytime soon.

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