According to economists from the International Monetary Fund (IMF), concerns over the trade imbalance between China and the United States being a result of China’s industrial policies are oversimplified. The IMF economists argue that factors such as macroeconomic fundamentals play a more significant role in determining external balances.
Amidst criticism from Washington and its allies regarding Beijing’s industrial overcapacity and export prowess, which has led to tariffs on Chinese products like electric vehicles, the IMF economists state that the connection between trade imbalance and industrial policy is not as direct as believed.
The economists, Pierre-Olivier Gourinchas, Ceyla Pazarbasioglu, Krishna Srinivasan, and Rodrigo Valdés, point to negative domestic demand shocks in China and dissaving shocks in the United States as key factors affecting the trade balance between the two countries.