Another view of the impact of the U.S.-China trade war was revealed today with the release of the Bureau of Labor Statistics’ “U.S. Terms of Trade” report, which measures the purchasing power of U.S. exports compared with imports.
The Bureau of Labor Statistics said in the 12-month period that ended in February, U.S. terms of trade increased 2.6 percent with Latin America. “Over the same period, the U.S. terms of trade with Canada rose 2.5 percent,” the report noted. “Terms of trade with Pacific Rim countries fell 0.7 percent from February 2018 to February 2019.”
With China, terms of trade fell 1.8 percent. “The U.S. terms of trade fell because export prices to China dropped 2.5 percent, while import prices from China declined by 0.7 percent,” authors of the report stated.
The deflation in purchasing power might continue as the administration said this week the $250 billion of Chinese exports that are subject to tariffs will likely remain in effect while economists expect price deflation of non-tariffed products between the two countries to continue.
Researchers at the BLS said prices for exports and imports are measured in U.S. dollars, “so exchange rates are already taken into account. We calculate the terms of trade index for China by dividing the China export index by the China import index, then multiplying by 100.” When there’s an increase in the China terms of trade index, it means that prices for exports to China are rising faster than prices for imports from China.