Compatible geopolitical outlooks can mean more trade

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Diversifying supply chains away from China | Good reasons to find new markets for FDI | World Trade Organization (WTO) | No more benefit from de minimis | More research from Hinrich Foundation

Diversifying supply chains away from China

The Bank for International Settlements finds that "geopolitical distance" can explain recent developments in trade relations. The Rhodium Group creates a diversification framework, rating which countries can serve as new trading partners in efforts to diversify from China. The Financial Times offers a three-part series on the new economic nationalism (part 1 | part 2 | part 3). Mary Hui of a/symmetric checks China’s technological chokeholds.

Mentioned publications 

1. Deconstructing global trade: the role of geopolitical alignment – Han Qiu, Dora Xia, and James Yetman, BIS Quarterly Review, September 16, 2024
   BIS finds that geopolitical distance is a relevant measure for explaining recent trade dynamics. 

2. A Diversification Framework for China – Agatha Kratz, Daniel H. Rosen, Camille Boullenois and Juliana Bouchaud, Rhodium Group, August 7, 2024
   The Rhodium Group looks at the potential other economies offer for diversification away from China. 

3. How national security has transformed economic policy – Sam Fleming, Demetri Sevastopulo, and Claire Jones, Financial Times, September 4, 2024
   In the first of a three-part series, the Financial Times looks at how national security concerns are shaping economic policymaking. 

4. China’s new back doors into western markets – James Kynge, Jude Webber, and Christine Murray, Financial Times, September 5, 2024
   In the second of a three-part series, the Financial Times looks at how China is evading trade and investment restrictions. 

5. Can globalisation survive the US-China rift? – Alan Beattie, Financial Times, September 6, 2024
   In the third of a three-part series, the Financial Times considers the threats to globalization. 

6. Checking China’s chokeholds – Mary Hui, a/symmetric, September 7, 2024
   Hui reports that consideration of technological chokepoints shapes China’s technological development. 

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Good reasons to find new markets for FDI

FDI flows are changing as geopolitical concerns take hold, and for other important reasons. The Financial Times finds that South Korea has emerged as a top US investor. The Rhodium Group introduces a tool for tracking China’s global investments, with the China cross-border monitor. Yuka Hayashi of the Progressive Policy Institute examines how Japanese companies are investing in foreign markets to fuel growth as their domestic market ages, and how foreign investment can help the US grow its manufacturing sector. 

Meanwhile, Nikkei Asia reports that CFIUS has postponed its decision on Nippon Steel’s acquisition of US Steel, and Keith Johnson in Foreign Policy takes a hard look at how steel built the modern economy. 

Mentioned publications 

1. South Korea emerges as a top US investor as China tensions escalate – Amanda Chu, Financial Times, September 18, 2024
   The FT reports that South Korea is the largest investor in the US, taking advantage of US efforts to carve China out of its supply chains. 

2. China Cross-Border Monitor – Rhodium Group, September 2024
   The Rhodium Group produces a new tool to track China’s global investments. 

3. Behind Japan’s U.S. Steel Bid: An Aging, Shrinking Home Market – Yuka Hayashi, Progressive Policy Institute, September 12, 2024
   Part one of a two-part series explain the importance of investing in foreign markets to Japanese companies. 

4. The U.S. Wants Manufacturing to Drive Growth. Foreign Friends Can Help – Yuka Hayashi, Progressive Policy Institute, September 12, 2024
   In part two of the series, Hayashi illustrates the contribution of foreign investment to US jobs and wages. 

5. U.S. authority postpones decision on Nippon Steel deal – Nikkei Asia, September 18, 2024
   Nikkei reports on CFIUS’s decision to give Nippon Steel 90 more days to consider its acquisition. 

6. How Steel Built the Modern Economy – Keith Johnson, Foreign Policy, May 15, 2024
   Johnson describes steel’s centrality to the modern world, green transition, trade, and economic security. 

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World Trade Organization (WTO)

The WTO’s annual World Trade Report offers analysis on who gains from trade, and Alan Beattie in the FT asks whether middle powers can save multilateral trade. 

Mentioned publications 

1. World Trade Report 2024 – World Trade Organization, September 2024
   The 2024 report looks at who gains from trade within economies. 

2. Can the middle powers save multilateral trade? – Alan Beattie, Financial Times, September 16, 2024
   Beattie highlights the urgency of agreeing on a common framework for carbon pricing.

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No more benefit from de minimis

New Biden Administration rules announced last week curtailing the de minimis exemption could reverse a ‘paradigm shift’ in retail, reports the New York Times.  

Mentioned publications 

1. Fact Sheet: Biden-⁠Harris Administration Announces New Actions to Protect American Consumers, Workers, and Businesses by Cracking Down on De Minimis Shipments with Unsafe, Unfairly Traded Products – The White House, September 13, 2024
   The Biden Administration announces actions to restrict use of the de minimis exception.

2. New Tariff Rules Could Reverse a ‘Paradigm Shift’ in Retail – Ana Swanson and Jordyn Holman, The New York Times, September 14, 2024
   The New York Times asks whether retailers will reconsider their tariff minimization strategies in light of a new Biden Administration rule.

More related analysis from HF:

• The Deglobalization Myth: How Asia’s supply chains are changing
  
• Is China’s overseas direct investment outflanking US trade strategy?
• Washington’s bid to kill de minimis targets China – and American consumers

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