Into the mire

China’s economic slump is pulling it further into the crossfire of American politics. Weaker domestic demand means imports are cooling faster than exports. With shipments to Europe falling, surpluses to the United States and elsewhere are swelling. That risks adding more fuel to the anti-China rhetoric from duelling American presidential contenders, President Barack Obama and Mitt Romney.

As if China’s slowdown wasn’t headache enough for Beijing, the two candidates have turned the world’s number-two economy into a whipping boy for what ails number-one. The 80,000 jobs created in June aren’t enough to dent the US unemployment rate of 8.2 per cent, and Romney has accused Obama of being soft on China. He vows to brand it a currency manipulator the day after taking office. Obama has fired back by launching a complaint at the WTO against Chinese trade duties on American cars.

The latest trade figures from China will give both campaigns further China-bashing ammunition. China’s 10.5 per cent increase in exports for the second quarter outpaced a 6.4 per cent rise in imports, resulting in a wider Chinese trade surplus with the rest of the world. Exports to the United States are one of the few things going right for China, with shipments there rising 14 per cent and helping offset declining exports to Europe. Never mind that imports are growing even faster. China’s $57 billion surplus with the United States may be growing more slowly, but it is still expanding at 14 per cent a year.

That reflects the relative strength — for the moment at least — of the US economy, which is stumbling forward as China appears to be hitting the brakes. Slower demand from China is hurting imports of key raw materials like steel, which fell 16 per cent in the second quarter; and machinery, imports of which have stagnated. That resulted in lower imports from Japan and South Korea.

That’s likely to prove small consolation to America’s battling candidates and Congress. They’re likely to seize on the latest numbers as evidence that China is trying to export its troubles to the United States. For China, then, the risks are twofold: first, that the winner makes good on his threat to erect trade barriers to China. And second, that US demand succumbs long before he gets the chance.