Capital Economics: The United States is the most productive country in the world, but it has become increasingly dependent on exports, particularly in agriculture, to keep its economy growing.
That is putting pressure on the value of the dollar, which is down about 10% against the euro since the election of Donald Trump in November.
In the last year, the dollar’s value has fallen by $4.8 trillion.
A combination of lower oil prices and a weaker dollar, combined with a slowdown in China and other developing countries, are putting further pressure on US exports.
China, which accounts for about a third of global trade, has been especially hard hit.
It has lost more than $8 trillion in value over the past year.
Other major economies that have suffered have been Britain, Japan and Germany.
Capital Economics’ Andrew Zimbalist says the impact of China’s export slowdown is a drag on the US economy.
“In terms of the US, it’s probably the most important economy, it will be the second largest economy in the US in the coming years,” he said.
“China’s slowdown is actually going to be the biggest drag on US economic growth over the next couple of years.”
In the first quarter of 2019, the US imported about $50 trillion, more than double what it imported during the same period a year earlier.
Zimble says the slowdown in trade is likely to put a dent in the gains made by companies in the manufacturing sector in recent years.
“They are going to start to get the message that if they are going out to do business in China, they need to be able to export more to China and that’s going to create some additional pressure on domestic manufacturing,” he says.
“That’s a concern for the rest of the economy.”
What about the global economy?
The US remains the biggest economy in Asia and the world’s fifth-largest in the European Union.
Capital Markets, a US consultancy, forecasts that China will become the world leader in the global manufacturing sector by 2020.
But Zimblis says China is struggling to become a leader in other areas such as services and financial services, because it is losing ground to countries such as the US.
“I think that it is really going to come down to the global financial services sector and what will be their future, what is the role of finance in that future,” he explains.
The US and its allies have stepped up pressure on China in recent months, including an attempt to block a planned pipeline linking China’s north-east to the US Gulf coast.
China is a major importer of oil and gas and has made it clear that it wants to maintain a favourable relationship with the US and others.
What is the economic impact of the rise of China?
The Chinese government has promised to boost its economy in order to boost trade and improve the competitiveness of its exports, but economists have warned that the impact is likely be short-lived.
According to the IMF, China’s exports have grown by around 6.5% in the past 12 months, and are expected to grow by another 7.2% this year.
Analysts say that the rise in China’s trade and investment is the main reason why it is becoming more dependent on foreign markets.
“The trade surplus is the biggest driver of the slowdown and that is the result of China exporting more than they are importing, so that has been the main driver of trade growth,” says Chris Warkentin, head of China research at consultancy Wood Mackenzie.
“I think they will need to do much more to create jobs, to help the economy recover and to try to regain some of the lost ground.”
However, Zimbles argues that the US could be one of the best places to invest.
“If the US can do much better than it is doing, I think China will come back.
If the US does better than what it is achieving, then China can come back.”