VINACHEM

China’s exports rose more than forecast, even as shipments to the US slumped sharply in the first month after US President Donald Trump hit its goods with tariffs of 145 per cent.

Total exports expanded 8.1 per cent in April, above the 2 per cent increase forecast by economists, buoyed by demand for materials from overseas manufacturers who rushed out goods to make the most of Trump’s 90-day tariff pause for countries other than China.

Shipments to the US fell 21 per cent after the imposition of tariffs in early April, while those to the 10-country Asean bloc surged 21 per cent, and exports to the European Union were up 8 per cent.

China’s tariffs on American goods meant that imports from the US fell almost 14 per cent.

The fortunes of trade-reliant businesses on both sides of the Pacific now hinge on talks between China and the US taking place in Switzerland this weekend, which could see tariffs reduced and some progress on export controls.

Chinese manufacturers had also been front-loading outbound shipments in anticipation of the tariffs. However, they are now banking on the weekend’s icebreaker tariff talks in Switzerland, as domestic demand remains weak, and Trump’s import taxes are expected to squeeze buyers in other markets.

Imports fell 0.2 per cent, compared with expectations for a 5.9 per cent drop, pointing to improving domestic demand as policymakers continue to take steps to prop up the economy.

“The Asean countries are speeding up their production to meet the July deadline, the 90-day negotiation break. Their production is highly reliant on China’s exports in raw materials and industrial inputs, so China’s exports got support,” said Dr Dan Wang, China director at Eurasia Group.

“Over the next two months, China’s exports could continue to be strong due to industrial capacity relocation, but the trade data could deteriorate quite quickly if the 145 per cent tariffs on China are still in place and Asean countries’ talks (with the Trump administration) don’t make progress,” she added.

China’s trade surplus with the US dropped to US$20.5 billion in April from US$27.6 billion in March, a win for Trump, who has repeatedly said he wants to narrow the gap.

If not lowered or removed, the tariffs could deal a heavy blow to China’s economy, which has relied on exports to drive growth, as it struggles to recover from the Covid-19 pandemic shocks and a protracted property market slump.

“The damage of the US tariffs has not shown up in the trade data for April,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management.

“I expect the trade data will weaken in the next few months gradually.”

“Hopefully, the trade negotiations between China and the US can reach agreement soon and bring down tariffs to mitigate the shock to global trade,” he added.

The two sides have staked out strong positions ahead of the talks, which might indicate it will be hard to make quick headway on any deal.

On May 8, just hours after Trump said he was unwilling to lower tariffs on China in order to unlock more substantive negotiations, Beijing repeated its demand that Washington cancel all its tariffs. 

– Source: Bloomberg