Other companies are doing the same math. A report in March by the Boston Consulting Group found seven industry groups, selling about $200 billion in Chinese-made imports, that will likely shift production back to the U.S. to duck rising costs in China. That could add between $20 billion to $55 billion to U.S. gross domestic product before the end of the decade, the authors estimated.
U.S. export gains in Chinese and other global markets will create between two million and three million American jobs, lower the U.S. unemployment rate by between 1.5 to 2.0 percentage points and cut the U.S. merchandise trade deficit by 25 to 35 percent, according to the study.
Demand for Chinese exports, meanwhile, is being hurt by the ongoing recession in Europe, China’s largest trading partner. The hit to China’s exports so far has been relatively mild compared to the sharp downturn that followed the financial panic of 2008, according to Carl Weinberg, chief economist at High Frequency Economics. Lost exports amount to about $300 billion - about half the losses from the 2008 downturn – and the Chinese economy is better able to weather the loss because its large and its currency is stronger than in 2008, he said. But he figures the drop in exports hasn’t run its course and could get a lot worse.
The slowdown in China is also starting to take a bite out of the economies of smaller, emerging economies and trading partners that supply the raw materials needed to feed China’s export machine.
“Asia should be very worried if the European situation continues to unravel," said Rob Subbaraman, chief Asia economist, at Nomura Group. “It can handle moderate growth in Europe or the U.S. But if we start to move toward a deep recession there’s a tipping point where Asia gets hit very hard again.”
To be sure, China’s economy is still growing at a pace that would feel like wild prosperity in larger developed economies like the U.S. or Europe. But as the last major engine of growth, some forecasters are cautioning that the loss of Chinese demand threatens to spark a wider global slowdown that will crimp demand for U.S.-made products.
U.S. manufacturers are “about to face a negative shock from the hit to exports from the deepening European downturn and the spreading impact on demand in other key trading partners in Asia,” said David Rosenberg, chief economist at Gluskin Sheff.
One big unknown is whether Chinese consumers will pick up the slack from the lost growth in exports. China continues to pursue an ambitious, 30-year plan to transform itself from a rural agrarian society to an urbanized manufacturing and consumer-driven economy. The ongoing flood of workers from farms to factories -- the largest peace-time migration in human history -- will continue to drive demand for new housing, cars and other consumer products.
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