The global supply chain isn’t bilateral.

President Trump’s tug of war with China continues. Last week the latest round of talks between China and the U.S. kicked off.  The United States is trying address the trade balance between China and the United States in a bilateral fashion. It seems that there isn’t really a bilateral supply chain, as much as the President wants it to be. 

Just before this latest round of Sino-American negotiations kicked off, French President Emanuel Macron and China’s President Xi Jinping announced a thirty billion Euro deal—close to thirty-five billion U.S. dollars—for Airbus aircraft. Of the 300 aircraft included by China in the deal, 290 are the single aisle A320 configuration. The A320 happens to be the aircraft that competes directly with Boeing’s grounded 737 Max 8 configuration.

It seems that there isn’t really a bilateral supply chain, as much as the President wants it to be. In a not-so-subtle challenge to U.S. interests, Politico quotes President Xi saying, "a united and prosperous Europe corresponds to our vision of a multipolar world." American businesses with supply chains and logistics threads extending into China need to pay attention.

President Trump’s game of checkers with China has morphed into a game of chess with the world.

China, Trade, and the Ripples

After establishing new trade surplus record with the U.S. in December, Chinese exports are collapsing. Statistics released on Friday—numbers released by China, not the United States—show that the expected realignment is underway.

China's politically sensitive trade surplus with the U.S. narrowed sharply, to $14.72 billion, in February, from $27.3 billion in January.  Now, these are numbers reported by the Chinese government, so some skepticism is in order.

“Dollar-denominated exports [by China] plunged 20.7 percent for the month of February from a year ago, missing economists' expectations of a 4.8 percent decline, according to a Reuters poll,” reports CNBC.

CNBC continues, “Dollar-denominated imports [by China] fell 5.2 percent in February from a year ago, missing economists' forecast of a 1.4 percent fall.”

The unemployment rate held steady at 3.8%. The latest employment statistics in the United States for February show non-farm job growth at a near standstill, according to the Labor Department; this may be an aberration, but it bears watching.      

U.S. Census Bureau statistics are still lagging due to the month-long government shutdown, so the best government sanctioned balance of trade numbers available are months old.

Bottom line: the supply chain in the United States remains healthy, logisticians appear to have realigned in anticipation of a collapse in Sino-U.S. trade, manufacturers seem to have found new sources of supply, and employment remains strong.

And China is getting nervous.