As China’s goods exports soar and its imports sag, its biggest trading partners are reacting differently. The Americans are taking a “not our problem” attitude, while (re)building their tariff wall. The EU is anxiously considering new trade barriers but struggling to agree on the details. What of a middle power such as the UK? As “China shock 2.0” hits, can this small island relax and let the cheap stuff roll in?
The most basic argument in favour is that Britons are acutely aware of the cost of living, and embracing China’s output means lowering it. Over the past couple of years, UK goods prices have risen by 2.4 per cent. Megan Peters of Goldman Sachs has estimated that the force of China’s trade flows prevented them from rising by a further 0.8 percentage points. Who doesn’t want a cheap electric car or bus to help with the green transition?
Other arguments include the claim that “making stuff” is no longer core to the UK’s economic identity and although the UK is still a trading nation, its speciality is professional services. Whereas the first China shock in the early 2000s caused pockets of economic pain, today there are fewer manufacturing workers to be disrupted by import competition.