with alan beaulieu


How have recent issues affected US investments in foreign countries? Tune in to the latest episode of TrendsTalk with ITR President Alan Beaulieu as he discusses recent misconceptions about global economic trends.



The below transcript is a literal translation of the podcast audio that has been machine generated by Rev.

Hi, everyone. This is Alan Beaulieu from ITR Economics and I’d like to talk to you about China and Europe. There’s a lot of misconceptions. There’s a lot of things people, including me, think we know, but the numbers are pretty interesting. We’ll see what they have to say. For instance, foreign direct investment into the United States, thus businesses overseas spending money to move to the United States, do a joint venture or to buy a U.S. company, and sometimes there’s this fear that China’s buying the U.S. I got this question just the other week about China buying the U.S. That would be foreign direct investment. Well, at the end of 2021, the latest available data, it was $38.25 billion that businesses in China invested in the United States to do one of those three things I just mentioned. That’s just shy of the December 2019 record high. It’s a significant amount of money there.

But, the amount of money coming into the United States from Europe, that same time period, 2021, was $3.19 trillion. I mean, that’s incredible. So, we had 83 times more money coming in from Europe than we did from China, and I daresay that most of us didn’t even realize that that was happening. European businesses were investing very, very heavily in the United States, and that bond between us just got tighter, and how about the other way around? The United States, where are we investing? Where’s our FDI going? Well, $118.2 billion went to China. That’s a record high. So, we’ve never had more money going into China, but the rate of change was at 2.7% and in Phase C, the lowest we’ve seen in 18 months. That’s a lot of money, though, $118.2 billion sure is.

But, how about the money that went into Europe in that same time period? That was $3.98 trillion or 33.7 times more than what went into China. So, Europe’s pouring it in and the United States is shoving it back to Europe and our bonds had never been tighter and stronger through this time period. That’s pretty amazing. There’s lots of reasons for it – supply chain difficulties, the mounting pressures in business and the economic stress that China and U.S. are feeling towards each other. It is a difficult time in our relationship. COVID response in China made it difficult for a lot of businesses, and President Xi Jinping is making statements that can be chilling to a lot of businesses. So, as all that’s going on, we find ourselves naturally turning to Europe.

But, you say, what about our trade with the different nations? Sure, there’s that business money flowing back and forth, but what about trade? That’s a very good question. Now, exports to the United States from China are $155.7 billion. That’s also a record high. So, we’ve never had more coming in, so that chilling of trade isn’t all that chilling if it’s at a record high, right? But the amount of money, excuse me, trade we have, our exports to China are at $155.7 billion. That’s a record high. It is indeed a lot of money. It’s slowing in its rate of rise with a 12/12 to 2.7%. That’s the lowest we’ve seen in 18 months, but it’s still a lot of money. It’s a record high.

Now, the amount of exports to Europe staying at $334.3 billion, even more money. It’s three times more just about than … No, two times more … Correct it, Joy, please. Two times more than what we were exporting to China. That’s a pretty impressive thing, and I bet you, well, I’m going to guess most of you didn’t know that. I know I didn’t. I was really pleased to see the number. The 12/12 rate of change is at 30.3% above 2020 levels. That’s a record high. So, we have twice the exports going to Europe. How about the imports?

Well, we have $563.9 billion coming into the U.S. from China. That’s a record high also, but we have 532.3 billion coming in from Europe. China’s got an edge there, got a little edge, but when you balance out what we are sending to Europe, what we’re getting in from Europe, our biggest trading partner is Europe. And, what’s the moral of the story? Well, the world’s changing, and as the world’s changing means, maybe your sourcing needs needs to be rethought. Maybe your investment strategy needs to be gone through again. So, why am I bringing this up? Because the world’s a changing place. There’s a shift in focus from the China focus to Europe focus, to a longer term history perhaps. Certainly supply chain ease, less risk. I would argue with that. Long-term relationships, easier to understand, strong historical ties, that certainly helps.

But, I would also say it’s because there’s some changes going on in China. The supply chain difficulties, we’ve seen the response to COVID. That’s why you see our eastern ports are still very, very busy, and our western seaports are seeing a lot less traffic. We’ve turned to Europe, and the business tie is strong and the relationship is getting stronger, and it may be a trend that you want to take advantage of. It may be a trend that you want to jump on, or at least one that you can capitalize on as you go forward. And, to all of us that are doing business in Europe, it just means that that relationship is not going to be tested the same way that it may be tested from other nations. I think it’s good news. China and Europe, and the winner is Europe. Have a great day. Thank you very much. I’m Alan Beaulieu for TrendsTalk from ITR Economics.