China's Global Trade Influence and Decoupling Attempts

China's integration into the global economy has significantly increased since it joined the World Trade Organization (WTO) in 2001.

Import Dependency on China

• In 1990, 2.1% of global imports came from China, rising to 6.6% by 2000.
• By 2011, China's share of global imports reached 13.5%.
• Just before the pandemic in 2019, this figure grew to 16.3%.

Trade Deficits and Tariffs

The G7 economies continue to run large trade deficits with China, which has been a key issue in US politics.

• In 2018, President Donald Trump imposed tariffs on Chinese steel and aluminum, initiating a trade war.
• Further tariffs included a 10% duty on all imports from China, with a goal of decoupling.

Decoupling Strategy and Challenges

The US and other nations have taken steps to reduce dependence on China, particularly in strategic sectors.

• The US banned Huawei from its 5G network, influencing countries like Australia and the UK to follow suit.
• ASML Holding halted shipments of microchip machinery to China under US pressure.

Despite attempts to reduce direct imports, indirect imports of Chinese goods through other countries like Mexico and Vietnam persist.

Global Value Chains and Economic Integration

China's deep integration into global value chains poses challenges to decoupling efforts.

• Commercial considerations still favor China as a cost-effective supplier.
• China dominates sectors like critical minerals and EV batteries, controlling 60% of rare earth metals and 80% of EV battery components.

Conclusion

Decoupling from China might not be feasible due to economic and geopolitical factors.

Engaging constructively with China while safeguarding domestic interests and addressing global challenges through multilateral cooperation is suggested as a more realistic approach.

Note: The views expressed are personal and do not reflect the opinion of the Business Standard newspaper.