Stephen Roach, former chief economist of Morgan Stanley, explains why the US will have difficulty sustaining growth if the rest of the world slows down:
Since the first quarter of 2009, when the US economy was bottoming out after its worst postwar recession, exports have accounted for fully 41% of the subsequent rebound. That’s right: with the American consumer on ice in the aftermath of the biggest consumption binge in history, the US economy has drawn its sustenance disproportionately from foreign markets. With those markets now in trouble, the US could be quick to follow.
Three regions have collectively accounted for 83% of America’s export-led growth impetus over the past three years – Asia, Latin America, and Europe. (Since regional and country trade statistics assembled by the US Department of Commerce are not seasonally adjusted, all subsequent comparisons are presented on the basis of a comparable seasonal comparison from the first quarter of 2009 to the first quarter of 2012.)
Not surprisingly, Asia led the way, accounting for 33% of the total US export surge over the past three years. The biggest source of this increase came from the 15-percentage-point contribution of Greater China (the People’s Republic, Taiwan, and Hong Kong). Needless to say, China’s unfolding slowdown – even under the soft-landing scenario that I still believe is most credible – is taking a major toll on the largest source of America’s export revival. The remainder of the Asian-led US export impetus is spread out, led by South Korea, Japan, and Taiwan – all export-led economies themselves and all heavily dependent on a slowing China.