Decoupling or Redirected There is much academic debate over whether U.S.- China trade has been decoupled, or merely redirected with Chinese goods diverted through other countries such as Mexico and Thailand. Part of the problem is using correlation to assume causation. Researchers at Penn State (NBER Working Paper 31922) conclude that it is more complex. There is some diversion but they found that comparative advantage is at play more than the tariffs that Washington imposed on China. They also found that capital intensive goods were more adversely impacted than more agile products, and that countries that have increased their exports to the U.S. have concurrently increased their sales to other countries.  Meanwhile, China has begun...

TAGS – North America, Macroeconomics