Kearney: Trade War Drove Down U.S. China Imports

During 2019, companies in the U.S. sourced substantially fewer manufactured goods from 14 traditional Asian trading partners, according to market research and consulting firm Kearney.

The change seems to have been a direct result of aggressive U.S. government trade policies, according to the seventh annual U.S. Reshoring Index. The ongoing trade war sent the Reshoring Index to a record high in 2019.

The Reshoring Index compares U.S. domestic manufacturing gross output to the level of manufacturing imports from 14 traditional Asian low-cost countries: China, Taiwan, Malaysia, India, Vietnam, Thailand, Indonesia, Singapore, Philippines, Bangladesh, Pakistan, Hong Kong, Sri Lanka and Cambodia.

Kearney attributed much of the shift to a 17% decline in U.S. imports of manufactured goods from China, which has long been the leading choice for offshore production. Manufactured imports from Vietnam and Mexico both increased last year, evidence that U.S. companies adapted their sourcing strategies even before the COVID-19 crisis began disrupting global supply chains early in 2020.

In 2019, U.S. manufacturing remained steady while imports from the 14 Asian trading partners notably declined. Imports of manufactured goods from the Asian countries shrunk to $757 billion from $816 billion in 2018, a 7.2% decrease while U.S. domestic manufacturing output was $6.27 billion in 2019, basically flat from 2018.

U.S. trade policies also appear to be changing trade dynamics among and between the various countries exporting manufactured goods to the U.S. While U.S. manufacturing imports from China declined, imports from the other Asian countries increased by $31 billion in 2019. Similarly, manufacturing imports from Mexico rose by $13 billion.

The U.S. Reshoring Index is expressed in basis points, Kearney noted, with a positive index number indicating net reshoring. The Reshoring Index of 98 is by far the highest yet registered. The previous index high was 11 basis points in 2011.

“Much of China’s loss was Vietnam’s gain,” said Patrick Van den Bossche, Kearney partner and co-author of the study. “Of the $31 billion in U.S. imports that shifted from China to other Asian LCCs, almost half was absorbed by Vietnam, which exported $14 billion more manufactured goods to the U.S. in 2019 than it did in 2018.”