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Despite Trade War, China Opens Wallet For U.S. Exports Of Semiconductors, Pharma

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China might be closing its wallet to some high-profile U.S. exports as part of the ongoing trade war, but it's opening it wide to others.

Included on that list are items used in the manufacture of cell phones, computers and other high-tech gadgets as well as medicines and medical equipment.

While soybeans dropped almost 95% in August, while motor vehicles slipped 56% and while oil went from a record total to zero in just two months, 21 U.S. exports to China have increased more than $100 million this year.

While not all of these fit neatly into the previously announced Made in China 2025 plan, a plan whose goal is for China to become a global leader in higher-end manufacturing and one that has drawn the ire of the Trump Administration over issues related to intellectual property theft and forced technology transfer, quite a few do.

What's growing rapidly?

Think machinery used to make semiconductors, the semiconductors and computer chips themselves.

U.S. exports of machinery used to manufacture semiconductors to China are up just under 70% on the year, 152% for the month of August alone, when compared to the previous August. That's a $1.16 billion increase this year. In 2017, China ranked third for these purchases from the United States, with 15% of the total, trailing Taiwan and South Korea. For the month of August, China became the United States' largest customer, with 23% of the total. The machinery is the sixth most-valuable U.S. export to China this year, trailing only aircraft and parts; oil, which soared through the first half of the year; motor vehicles; computer chips and semiconductors; and soybeans. Semiconductor exports to China are up $428.73 million this year, with $96.05 million of that in August alone, the most recent U.S. Census Bureau data available.

Think medical devices, everything from ultrasound equipment to syringes and catheters.

In that category, U.S. exports to China have increased $293.23 million this year, with $65.19 million of that in August alone.

Think pharmaceuticals for cardiac conditions, to slow inflammation and to fight auto-immune diseases,  as well as certain chemical compounds often used in the pharma industry.

In the first category, the pharmaceuticals, U.S. exports grew $125.80 million, a 233.24% increase over the previous August. The value of cardiac medications have more than doubled while anti-inflammatory medicines have tripled this year. In the second category, heterocyclic compounds, a relatively minor U.S. export to China, the value increase in August makes it worthy of note: 498%.

Think polymers closely associated with the plastics industry. Those have increased $206.72 million this year.

Think rare-earth metal compounds, titanium ores and lead, all important to the cell phone and aviation industries.

While they are relatively minor in value, the increases are not.

Rare-earth metal compounds, valued at less than $1 million through August of 2017, totaled $53.85 million this year. That's an increase of more than 5,600%. Titanium ores are up more than 1,800%. Lead, almost all of it exported in August, up nearly 6,000% on the year.

What does a trade war look like, particularly one involving the world's two largest economies? That's hard to know, since the United States has not been in a full-scale trade war for more than seven decades. But the picture might be coming into focus.

On the Chinese side, it looks like it will try to punish key Trump and Republican constituencies where it can -- soybeans, oil and motor vehicle exports originate most commonly in so-called "red" states -- and increase purchases of those items where the United States has particular expertise and which are more "mission critical," things like semiconductor machinery, semiconductors, pharmaceuticals and medical devices.

California, a "blue" state, leads the nation in exports of semiconductor machinery. With semiconductors, California trails top-ranked Texas, a "red" state but is followed by Oregon and Vermont, two other blue states. Pharmaceutical exports originate most frequently in Puerto Rico, whose citizens can vote in presidential primaries but not elections. For medical device exports, California and Massachusetts, both blue states, are the leaders.

 

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