BEIJING • China's exports unexpectedly returned to growth last month despite higher US tariffs, but imports fell the most in nearly three years in a further sign of weak domestic demand that could prompt Beijing to step up stimulus measures.
China's imports last month were much weaker than expected, falling 8.5 per cent, the sharpest drop since July 2016. That left the country with a trade surplus of US$41.65 billion (S$57 billion) for the month.
Some analysts suspected Chinese exporters may have rushed out shipments to the United States to avoid new tariffs on US$300 billion of goods that President Donald Trump is threatening to impose in a rapidly escalating trade dispute.
But yesterday's better-than-expected export data is unlikely to ease fears that a longer and costlier US-China trade war may no longer be avoidable, pushing the global economy towards recession.
China's exports last month rose 1.1 per cent from a year earlier, compared with market expectations for a modest decline, data showed.
"We expect export growth to remain positive in June, likely supported by continued front-loading of US-bound exports, but it should then tumble in the third quarter, when we expect the threatened tariffs to be imposed," economists at Nomura said in a note to clients.
"Therefore, we believe Beijing will likely step up its stimulus measures to stabilise financial markets and growth."
Analysts polled by Reuters had expected last month's shipments from the world's largest exporter to have fallen 3.8 per cent from a year earlier, after a contraction of 2.7 per cent in April.
While China is not as dependent on exports as in the past, they still account for nearly a fifth of its gross domestic product.
Trade tensions between Washington and Beijing escalated sharply last month after the Trump administration accused China of having "reneged" on promises to make structural changes to its economic practices.
Mr Trump on May 10 slapped higher tariffs of up to 25 per cent on US$200 billion of Chinese goods and then took steps to levy duties on all remaining US$300 billion of Chinese imports. Beijing retaliated with tariff hikes on US goods.
The US leader said yesterday he expects to talk with his Chinese counterpart Xi Jinping at the Group of 20 Summit in Osaka on June 28 and 29, warning that he will impose new tariffs if there is no meeting.
"Yes it would," Mr Trump told CNBC television when asked if a failure by Mr Xi to attend the summit later this month in Japan would lead to the huge new tariffs kicking in. But Mr Trump said the meeting was "scheduled" and "I think he will go".
China's foreign ministry said yesterday that Beijing is open to more trade talks with Washington, but had nothing to announce about a possible meeting.
Observers such as Capital Economics analysts believe the chances of a lasting trade deal are receding as both sides appear to be digging in for a long battle.
Damage from the trade war, along with a broader softening in global demand, will make this year the worst year for trade since the financial crisis a decade ago, with only 0.2 per cent growth, according to economists at ING.
China's trade surplus with the US, a major irritant for Washington, widened to a four-month high of US$26.89 billion last month, from US$21.01 billion in April, yesterday's data showed.
REUTERS, AGENCE FRANCE-PRESSE