China's exports top forecasts as shippers rush to meet tariff deadline
Global traders and investors are waiting to see whether the world's two largest economies can agree on a durable trade deal by August 12 or if global supply chains will again be upended by the return of import levies exceeding 100%.
U.S. President Donald Trump has raised the prospect of further tariffs, including a 40% duty on goods rerouted to the U.S. via transit hubs, that took effect on Thursday, as well as a 100% levy on chips and pharmaceutical products, and an additional 25% tax on goods from countries that buy Russian oil.
China's outbound shipments rose 7.2% year-on-year in July, customs data showed on Thursday, beating a forecast 5.4% increase in a Reuters poll of economists and accelerating from June's 5.8% growth.
China's trade war truce with the U.S. - the world's top consumer market - ends next week, although Trump hinted further tariffs may come Beijing's way due to its continuing purchases of Russian hydrocarbons.
Imports grew 4.1%, defying economists' expectations for a 1.0% fall and climbing from a 1.1% rise in June, pointing to improving domestic demand as policymakers step up efforts to encourage households to boost spending.
"The trade data suggests that the Southeast Asian markets play an ever more important role in U.S.-China trade," said Xu Tianchen, senior economist at the Economist Intelligence Unit.
"But it's not all about the transshipments that Trump seeks to stop, ASEAN countries are also importing raw materials and components from China before exporting finished products to the U.S.," he added.
China's exports to the U.S. fell 21.67% last month from a year earlier, the data showed, while shipments to ASEAN rose 16.59% over the same period.
Trump said on Tuesday the U.S. was close to a trade deal with China and that he would meet his Chinese counterpart Xi Jinping before the end of the year if the world's two largest economies could come to an agreement.
China's July trade surplus narrowed to $98.24 billion from $114.77 billion in June. Separate data from the U.S. Commerce Department's Bureau of Economic Analysis on Tuesday showed the U.S. trade gap with China shrank to its lowest in more than 21 years in June.
Chinese government advisers are stepping up calls to make the household sector's contribution to broader economic growth a top priority at Beijing's upcoming five-year policy plan, as trade tensions and deflation threaten the outlook.
And top leaders have vowed to step up regulation of aggressive price-cutting by Chinese companies that is pushing prices ever lower.
But economists warn that reversing the current deflationary slump will be far more difficult than during the last round of supply-side reforms a decade ago, as the downturn now poses a broader threat to employment, which Chinese leaders have emphasised is a core component of social stability.
Reaching an agreement with the United States — and with the European Union, which has accused China of producing and selling goods too cheaply — would give Chinese officials more room to advance their reform agenda.
However, analysts expect little relief from Western trade pressures. Export growth is projected to slow sharply in the second half of the year, hurt by persistently high tariffs, President Trump's renewed crackdown on the rerouting of Chinese shipments and deteriorating relations with the EU.
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