This report includes forecasts, projections and other predictive statements that represent UCLA Anderson Forecast's economic analysis and perspective on the current state and future outlook of the economies of The United States and China in light of currently available information. These forecasts are based on industry trends and other factors, and they involve risks, variables and uncertainties. This information is given in summary form and does not purport to be complete. Information in this report should not be considered as advice or a recommendation to you or your business in relation to taking a particular course of action and does not take into account your particular business objectives, financial situation or needs.
Readers are cautioned not to place undue reliance on the forward looking statements in this report. UCLA Anderson Forecast does not undertake any obligation to publicly release the result of any revisions to these forward-looking statements to reflect the occurrence of unanticipated events or circumstances after the date of this report. While due care has been used in the preparation of forecast information, actual results may vary in a materially positive or negative manner. Forecasts and hypothetical examples are subject to uncertainty and contingencies outside UCLA Anderson Forecast's control.
The Uncertain Economy and the Reshaping of Global Supply Chains
2023 will be another year full of economic uncertainty for both the U.S. and China. After a series of aggressive interest rate hikes by the Fed, from 0% to 4.6% over the past 12 months, we are seeing slowing inflation rates as well as negative economic consequences. The rapid collapse of Silicon Valley Bank (SVB) on March 10, 2023, sent a shock wave through the financial world. After a bank run of $42 billion, U.S. federal regulators took control of SVB, the 16th largest bank with $195 billion of assets. To prevent a spreading panic in the banking system, U.S. regulators announced emergency measures that guaranteed all deposits of SVB, and by implication, all other banks.
Competition, Rivalry, and Decoupling
One way to think about U.S./China economic relations is through three lenses: cooperation on general merchandise trade, competition on technology and talent, and rivalry on geopolitics. Though each has its own dynamic, they are intertwined. For example, in the geopolitical realm, U.S. House Speaker Pelosi’s visit to Taiwan during her recent Asia trip angered Beijing and escalated the tensions between the two countries. As a result, more competition/rivalry and less cooperation between the U.S. and China appear to be in the future. These types of events create more uncertainty and, therefore, negatively impact business and investment.
Growth and Trade in Turbulent Times
As we enter the third year of the pandemic, the global economy faces several challenges and uncertainties. First, the COVID-19 variants Alpha, Delta, and Omicron arrived one after another suggesting that there may be future variants that could cause more economic disruption. Second, the inflation monster has come alive in the U.S. on strong economic growth and inflation is cooling in China on weak economic growth.
China's Slowing Economy to Get Little Help From a Growing U.S.
Prior to President Biden taking office last January, there was hope on the part of some and a concern on the part of others that the hard line that the U.S. had taken with China with respect to trade and investment would be eased. In the eight months since then, an easing of the hard line has not happened. In fact, it has been the opposite and that has implications for U.S./China trade and investment over the next two years.
Status Quo for U.S.-China Relations
For more than a year, the world has been disrupted by the COVID-19 pandemic. There have been more than 2.3 million deaths, and it induced a global recession. In addition, shortly after the January 2020 signing of the Phase One trade agreement, the outbreak in the U.S. and the rhetoric associated with it resulted in a deterioration of U.S./China relations.
Uncertainty in the Post-Election and COVID-19 World
The election is over with and there will be a change in administrations come January 20th. However, that does not eliminate all of the uncertainty with respect to U.S. economic policy.
Rising Tensions, a Pandemic and the Chinesecentric U.S. Real Estate and Tourism Markets
There is no end in sight to a deteriorated U.S. / China relationship. In previous reports we have documented the implication of this for U.S. / China economic relations. Our projections have not changed since our July report, entitled Eye of the Storm.
Business in the Eye of the Storm
In recent months the political relationship between the U.S. and China has slumped to a low point. After a two-year trade war between the two largest economies in the world, in January the Phase One trade agreement was signed.
The Pandemic and the Trade Agreement
This year began with two significant events affecting U.S./China economic relations. First, the January 2020 outbreak of coronavirus (COVID19) interrupted China to U.S. supply chains with closed factories and extended holidays. It has now become a worldwide pandemic.
The Trade War Deepens
On September 1, 2019, when the U.S. imposed 15% tariffs on a new list of Chinese imports with a value of around $110 billion, the U.S./China trade dispute became more of a fullblown trade war. If, as in previous negotiations, the upcoming October negotiation fails, it is expected that China will face another increase on imports currently subject to tariffs of from 25% to 30%.
Trade Skirmishes with a chance of More to Follow
It was surprising as well as unfortunate that the five-month-long trade negotiations between the U.S. and China ended abruptly May 10th with the U.S. increasing tariffs from 10% to 25%, on $200 Billion of Chinese imports. It is unclear whether a new round of talks to de-escalate trade tensions will occur soon.
A New U.S.-China Trade Agreement: Around the Corner?
The world breathed a sigh of relief when the U.S. announced that there would be no additional tariffs imposed on Chinese imports on the March 31, 2019 deadline. The explanation was that the trade negotiations between the U.S. and China were making progress. A full-blown trade war was avoided, for the moment.
A Transition from Engagement to Competition
At the 40-year anniversary mark of U.S.-China diplomatic ties, the relationship between these, the two largest economies in the world, is on the cusp of a transition from strategic engagement in the past to strategic competition in the future. The 2018 trade dispute between the U.S. and China are in 2019 only part of a competitive rivalry; one that includes domestic economic policy, technology, and geopolitics.
U.S.-China Trade Tensions Escalate
Trade tensions between the U.S and China have been rising since the U.S. imposed a 25% tariff on approximately $34 billion of Chinese goods July 6 and on an additional $16 billion of Chinese imports August 23. China retaliated each time with tariffs on approximately the same value of imports from the U.S. Subsequently the U.S. announced a plan to impose 10% tariffs on an additional $267 billion of Chinese imports.
The Era of "America First" and "The China Dream"
Welcome to the first of a series of periodic reports emanating from a newly established collaboration between The UCLA Anderson Forecast and Cathay Bank. In this series we will present economic analysis and perspective on the current state and future outlook of the two largest economies in the world: The United States and China.p>
Cathay Bank has collaborated with UCLA Anderson Forecast to produce a U.S.-China Economic Report. In this report, UCLA Anderson Forecast will talk about their view of economic analysis and perspective on the current and future outlook relating to the two largest economies in the world - The United States and China.
UCLA Anderson Forecast has been the leading independent economic forecast of both the U.S. and California economies for over 70 years. The annual economic report and quarterly columns written by UCLA Anderson Forecast will focus on current topics affecting investment flows and associated economic events between China and the United States.