New World Investment Research

I plotted China’s balance of trade against Industrial Production: Manufacturing index in the US and found that Janet Yellen was indeed right when she said: “People like me grew up with the view: If people send you cheap goods, you should send a thank-you note. That’s what standard economics basically says. I would never ever again say, ‘Send a thank-you note.’ ”

China’s trade surplus keeps rising, while US manufacturing has been essentially flat since the early 2000s. The two curves show a clear decoupling. This is the structural shift behind today’s geopolitical and economic tensions.

Yet uncertainty remains around the future direction of US tariff policy and around how long China can rely on external demand given its weak domestic consumption.