Warehouses in southern California are full to bursting withChinese goods rushed across the Pacific ahead of President DonaldTrump's tariff deadlines.

“It's been quite a run in the last six months,'' says PhillipSanfield, a spokesman for the Port of Los Angeles, which ended 2018with its busiest December on record with the equivalent of morethan 900,000 20-foot containers moving through its docks.

Those chock-a-block dockyards seen in mid-January are evidenceof a phenomenon in global trade which economists are stillstruggling to capture the full extent of: “front loading.”

Customers for Chinese goods brought forward their orders in theexpectation that duties would rise at the end of 2018. For most oflast year, this trend cushioned the effect of the trade war onChina's economy. The problem is, last year's forward buying meansthat fewer orders than normal are set to get booked now, depressingtrade at the start of the year.

How this distortion in the U.S.-China trading relationshipcombines with the other risks to China's export performance thisyear will help determine how bad the slowdown in the world'ssecond-largest economy will become.

Anecdotal evidence suggests front-loading was significant. Yetit's tougher to isolate it as a factor when looking at economicdata from either side of the Pacific Ocean.

“A trawl of the latest data provides limited support for thethesis,” according to Chang Shu, David Qu, and Tom Orlik atBloomberg Economics. “It might not be a significant factor at themacro level. Either way, we think exports are in for a hard timethis year, given continued uncertainty surrounding the China-U.S.trade talks and signs of weakening global demand.”

Chinese Vice Premier Liu He was in Washington Wednesday for thestart of what the White House is describing as “very, veryimportant” talks on trade this week, as a March 1 deadline thatcould see higher tariffs on $200 billion of Chinese goodsapproaches. With knotty issues from intellectual property to thebilateral imbalance still unresolved, there's little sign yet thatan agreement is likely.

That, plus signs of cooling demand from the U.S. to Europe andemerging Asia have had economists busy writing down their estimatesfor goods sold abroad by China, the world's largest exporter.Forecasters surveyed by Bloomberg now see exports growing at just 4percent in 2019, down from more than 11 percent last year and 1.5percentage points lower than the consensus forecast inDecember.

The Bloomberg Economics analysis led by Chang Shu shows thatduring the second half of 2018 China's exports picked up across anumber of regions, not just to the U.S., signaling healthy demandin the global economy.

“Assuming the slightly higher growth of China's exports to theU.S. was due to front-loading in the second half of 2018, weestimate the amount attributable to that factor to be a negligible0.2 percent of 2018 exports,” the economists wrote.

Whatever the extent of front-loading, the strength of worldwidedemand is the key determinant of how robust global trade is rightnow. One indicator of that, shipping rates on the Hong Kong to LosAngeles route, show while that the boom from 2018 is definitelygone, prices have also been slower to pick up ahead of the ChineseNew Year than in previous years.

Robert Koopman, chief economist of the World Trade Organization,said recent data from China confirmed the slowdown in global tradethat many expected was underway as the impact of Trump's trade warfilters through the global economy. January trade data from Chinais scheduled for release on Feb. 14.

See also:

• Trade War Is “Miles and Miles” fromResolution
• China Said to Offer Path to End U.S. TradeImbalance
• Will Trump-Xi Truce Bridge U.S.-ChinaDivide?

Lawrence Leung, managing director of Sun Hing Knitting FactoryLtd., which makes a range of garments in Hong Kong and China forglobal markets, said his industry is seeing demand come off.

“The whole trade is feeling a little bit of a pinch from theslowing down in the States,” he said.

From: Bloomberg

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