How China Is Driving U.S. Economy

by: Ironman at Political Calculations

Annualized Growth Rates of US-China Trade, January 1985 through May 2010 Here at Political Calculations, we use international trade data to diagnose the relative economic health of nations. And since the U.S. Census Bureau has released its international trade data through May 2010 earlier today, we thought we'd take a look at the recent trends to see how things are going.

Our first chart today shows the annualized growth rates of U.S.-China trade from January 1985 through May 2010. What we find is that U.S. exports to China continues to grow, but at a slower rate than we saw previously. After spiking in January 2010, the year-over-year change in the rate of growth of U.S. exports has tailed off, and is perhaps stalling out.

U.S. Exports to China Doubling Rate Chart, January 1985 through May 2010 Since a growing economy demands more imports, what this observation indicates is that China's economy has been growing, but at a much slower pace than we saw at the beginning of this year.

We also see that the rate of growth of China's exports to the U.S. is also growing, indicating that the U.S. economy is growing, although at a much slower pace. We see that what had been a downward trend through the recession began picking up after September 2009, suggesting that the U.S. recession ended at that time.

U.S. Imports from China Doubling Rate Chart, January 1985 through May 2010 The timing of the end of the Chinese economic downturn and the coinciding apparent end of recession in the United States, along with the spike in U.S. exports to China at the beginning of the year coinciding with strong GDP growth seen in U.S. in the first quarter of 2010 suggests that China's economy is perhaps driving the U.S. economy.

With that growth apparently stalling out in the second quarter of 2010, and assuming that China is indeed driving the U.S. economy, that perhaps explains much of what we've seen in the U.S. job market in recent months.

It would then appear that U.S. Treasury secretary Timothy Geithner is correct and the U.S. is not capable of driving global growth. It would seem that China is. And the U.S. is following.