Redirecting Chinese Exports from the USA: Evidence on Trade Deflection from the First U.S.-China Trade War

With the prospect of far-reaching decoupling of goods trade between China and the United States, fears of deflection of Chinese exports to third markets have returned. This briefing examines the factual record on the frequency of and foreign government response to Chinese trade deflection during the first U.S.-China Trade War before the COVID-19 pandemic scrambled global trade. Using product-level evidence on imports into G20 members (ex-USA) and Switzerland, we find that trade deflection occurred 42% of the time in big ticket export items. Where trade deflection happened, importing governments took defensive measures in only half of cases. There is huge variation across importing nations in the scale of Chinese trade deflection and in their appetite for absorbing extra imports without taking defensive action. We relate these findings to the current scale of Chinese exports to the USA and to the likely determinants of Chinese trade deflection to third markets going forward.