VINACHEM

China’s exports to the US are expected to rebound in June as exporters ramp up frontloading efforts before the 90-day trade truce between the two global economic superpowers expires in August.

China May exports to US shrink 34.5% year on year

China’s imports from the US fall by 18.6%

US-bound freight rates from China remain elevated

Despite the tariff rollback in mid-May, US-bound exports fell by 34.5% year on year in May to $28.8 billion, a sharper decline than the 20.9% fall recorded in April, official data showed on 9 June.

“The boost from the US tariff rollback should be more significant in June, as it might take a couple of weeks to restore the logistics network that was disrupted by what had nearly become a US-China trade embargo,” Japan’s Nomura Global Markets Research said in note.

“This could be because, as bilateral trade collapsed in April amid exceptionally high tariffs imposed by the two countries, many container ships for US-China shipping lanes were re-routed to other lanes.”

A 90-day trade truce between China and the US was agreed on 12 May but ongoing negotiations face threats from slow rare-earth shipment approvals.

US tariffs on Chinese goods were at 30% from 14 May to 12 August, while China levies 10% duties on US imports.

The sharp recovery in container bookings and freight rates also indicate an incoming rebound in US-bound exports in June, according to Nomura.

“The temporary trade truce will provide room for exports to strengthen in June-August before the momentum reverses with payback from the strong frontloading to-date,” said Ho Woei Chen, an economist at Singapore-based UOB Global Economics & Markets Research.

China’s imports from the US fell by 18.6% year on year to $10.8 billion in May, a steeper decline than the 13.9% fall recorded in April, “perhaps due to similar issues with near-term shipping capacity”, Nomura noted.

As a result, the US share in China’s total exports fell further to 9.1% in May from 14.7% for the whole of 2024.

Following substantial export contraction and a less severe import decline, China’s trade surplus with the US decreased further to $18.0 billion in May from $20.5 billion in April.

OVERALL EXPORT GROWTH SLOWS

China’s overall exports fell by 4.8% year on year to $316.1 billion in May, slowing from the 8.1% growth in April.

Imports fell by a steeper rate of 3.4% year on year to $212.9 billion in May, from the 0.2% contraction in April.

China’s overall trade surplus increased 25% year on year to $103.2 billion in May.

Export growth to its largest market, ASEAN, which is also widely viewed as a major rerouting pathway for Chinas’ US-bound shipments, slowed to 14.8% year on year in May from 21.1% in April.

This was mainly a result of base effects, as growth of exports to ASEAN surged to 24.8% year on year in May last year from 13.0% a month earlier, Nomura noted.

Among ASEAN countries, Vietnam and the Philippines took in higher volumes of Chinese exports in May.

China’s exports to the EU, Canada and Australia improved in May, as exporters shifted to developed markets other than the US.

“The acceleration of exports to other economies has helped China’s exports remain relatively buoyant in the face of the trade war,” Lynn Song, chief economist for Greater China at Dutch banking and financial information services firm ING said in a note.

EXPORTS IN MAJOR CATEGORIES MIXED IN MAY

China’s ships and semiconductors registered solid double-digit export growth, while shipments of motor vehicles and auto parts also picked up.

Demand for chips, in particular, continued to benefit from the pause in US tariffs on technology products such as smartphones, computers, and semiconductors.

However, exports of rare earth materials shrunk sharply, and products such as handbags, footwear, toys, and furniture declined due to a drop in US demand.

US-CHINA TRADE TALKS RESUME

Following a rapid re-escalation in late May, trade tensions between the US and China eased on 5 June following a phone call between US President Donald Trump and China President Xi Jinping. It set the stage for a new round of dialogue between their top trade officials in London this week.

Ahead of the trade talks, China reportedly approved temporary export licenses to rare earth suppliers of the top three US automakers, as Trump claimed Xi agreed to restart the flow of rare earth minerals.

“As US and China resumed trade negotiations this week, China’s Commerce Ministry confirmed that it has granted approval to some applications for the export of rare earths which will likely lead to a recovery in rare earth exports in June,” UOB’s Ho said.

“Following the Phase 1 trade deal in 2020, we think an eventual trade deal this time would likely commit China to reduce its trade surplus with the US by increasing its US imports,” she said.

While the baseline tariff rate for China is likely to be raised, the two countries may find common ground on the Trump administration’s concerns regarding China’s involvement in the fentanyl trade, according to Ho.

“This could potentially lead to a removal of the 20% fentanyl-related tariff, in the optimistic scenario. Thus, it is conceivable that the “final” US tariff rate on imports from China may settle between 30% to 60%.”

CONTAINER FREIGHT RATES ON THE RISE

US-bound freight rates have remained elevated, while growth in weekly container throughput dropped to 1.3% year on year on 8 June from 10.2% a week earlier, which “dims the outlook of China’s overall exports”, Nomura said.

The China Containerized Freight Index (CCFI), which tracks average shipping prices from China’s 10 major ports, rose 3.3% week on week as of 6 June, it said.

This included a 1.6% increase to Europe and a 4.1% rise to the US East Coast.

In contrast, the Ningbo Container Freight Index (NCFI), tracking outbound container shipping costs, eased 0.4% week on week on 6 June, according to Nomura.

Specifically, it saw a 9.1% decline to the US West Coast and remained unchanged for the US East Coast during the same period.

Internationally, the Freightos Baltic Index (FBX), reflecting spot rates for 40-foot containers across 12 global trade lanes, surged by 52.3% week on week on 6June, “indicating a significant jump in global shipping costs”, Nomura said.  – Source: ICIS