China's export growth surges despite trade war with US

Workers unloading cargo at a port in Zhangjiagang in Jiangsu province. Washington is set to begin collecting 25 per cent tariffs on another US$16 billion (S$21.8 billion) in Chinese goods on Aug 23.
Workers unloading cargo at a port in Zhangjiagang in Jiangsu province. Washington is set to begin collecting 25 per cent tariffs on another US$16 billion (S$21.8 billion) in Chinese goods on Aug 23.PHOTO: AGENCE FRANCE-PRESSE

Surplus with US remains near record highs, even as Washington prepares fresh tariffs

BEIJING • China's exports surged more than expected last month despite fresh US duties and its closely watched surplus with the United States remained near record highs, as Washington finalised its new tariff list in a bitter dispute that some fear could derail global growth.

In the latest move by President Donald Trump to put pressure on Beijing to negotiate trade concessions, Washington is set to begin collecting 25 per cent tariffs on another US$16 billion (S$21.8 billion) in Chinese goods on Aug 23. Both countries have already slapped tit-for-tat duties on US$34 billion of each other's goods.

China has repeatedly warned it will strike back, and has begun enforcing or is getting ready to enforce its own retaliatory tariffs, saying the US is threatening the global free trade order with its protectionism.

China's headline numbers are the first readings of the overall trade picture for the world's second-largest economy since US duties on US$34 billion of Chinese imports came into effect on July 6.

China's surplus with the US shrank marginally to US$28.09 billion last month from a record US$28.97 billion in June. Washington has long criticised China's trade surplus with the US and has demanded Beijing cut it.

Still, disagreements between the two major economic powers run deeper than just the trade balance and tensions remain over market access, intellectual property, technology transfer and investment.

A weaker yuan, which marked its worst four-month fall on record between April and last month, may have taken the sting out of 25 per cent tariffs on US$34 billion exports to the US. However, analysts still expect a less favourable trade balance for China in the coming months, given it's early days in the tariff brawl.

"Looking ahead, we expect export growth to cool in the coming months, though this will primarily reflect softer global growth rather than US tariffs, the direct impact of which will continue to be mostly offset by the renminbi's (yuan's) recent depreciation," Capital Economics senior China economist Julian Evans-Pritchard wrote in a note.

A weaker yuan, which marked its worst four-month fall on record between April and last month, may have taken the sting out of 25 per cent tariffs on US$34 billion exports to the US. However, analysts still expect a less favourable trade balance for China in the coming months, given it's early days in the tariff brawl.

After a strong start to the year, growth in the world's second-largest economy cooled slightly in the second quarter, partly hit by the government's years-long efforts to tackle debt risks.

The worry is that the escalating Sino-US trade war, rising corporate bankruptcies, and a steep decline in the value of the yuan versus the dollar could put a significant dent on the economy.

The government has responded by releasing more liquidity into the banking system, encouraging lending and promising a more "active" fiscal policy.

China has already retaliated against the US with its own tariffs and proposed others if Washington goes ahead with all its threats.

It has not yet given a date for its previously announced retaliatory tariffs on US$16 billion in US goods, which will target commodities such as crude oil, natural gas, coal and some refined oil products.

The latest US$16 billion list from the US will hit semiconductors from China, though many of the basic chips in these products originate from the US, Taiwan or South Korea.

REUTERS

A version of this article appeared in the print edition of The Straits Times on August 09, 2018, with the headline 'China's export growth surges despite trade war with US'. Print Edition | Subscribe