China's exports beat forecasts in April, boosted by demand for materials from overseas manufacturers that rushed production to take full advantage of U.S. President Donald Trump's 90-day tariff pause.
The world's two largest economies are locked in a bitter tariff war, and companies on both sides of the Pacific will seek some kind of resolution at closely watched trade talks in Switzerland this weekend.
Customs data released on Friday showed China's shipments rose 8.1% from a year earlier in April, beating a forecast for a 1.9% increase in a Reuters poll of economists but slowing from a 12.4% jump in March.
Trump announced sweeping “reciprocal tariffsof 10% on April 2. It then offered a reprieve to most countries. The White House was still working on several trade deals. China, however, was left out of the reprieve. The country was hit with 145% tariffs. This began a protracted game of cat and mouse that has shaken global markets and destabilized supply chains.
Expectations and impact on exports
Chinese manufacturers had also been bringing forward outbound shipments in anticipation of the duties, but are now counting on tariff talks between U.S. and Chinese officials in Geneva on Saturday.
Imports fell 0.2%, while expectations had been for a 5.9% decline. This suggests domestic demand may be more resilient than anticipated. Policymakers continue to take steps to support the US$19 trillion economy.
“ASEAN countries are ramping up production to meet the July deadline, the 90-day window for negotiations. Their production relies heavily on Chinese exports of raw materials and industrial inputs, so Chinese exports have been supported,” said Dan Wang, China director at Eurasia Group.
“In the next two months, China’s exports may remain strong due to the reallocation of industrial capacity, but trade data could deteriorate rapidly if the 145% tariffs on China are still in place and ASEAN countries’ negotiations (with the Trump administration) do not progress,” he added.
Exports to Southeast Asian countries rose 20.8% in April.
China's exports to the US, meanwhile, fell by 21%. That means the trade surplus with the US fell from $27.6T in March to $20.5T, a victory for Trump, who has repeatedly said he wants to close the gap.
High risks
Beijing cannot afford a trade war with the US. But it sees Trump’s tariffs as unwanted interference. The authorities want to implement painful domestic reforms at their own pace to sustain long-term growth.
If not reduced or removed, the tariffs could deal a severe blow to China’s economy. The country relies on exports to drive growth while also struggling to recover from the shocks of the pandemic and a prolonged housing slump.
“The damage from U.S. tariffs didn’t show up in April’s trade data,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management. “I expect the trade data to gradually weaken in the coming months.”
“I hope that trade negotiations between China and the US can reach an agreement soon and reduce tariffs to mitigate the shock to global trade,” he added.
In recent months, Beijing has reiterated its confidence that China could achieve its growth target of “around 5%” for the year and has rolled out measures to boost consumption and support the country’s exporters.
Reactions and strategies to keep trade active
The government announced on Wednesday a series of monetary stimulus measures, including liquidity injections and interest rate cuts, to ease the tariff impacts on the economy.
For now, trade momentum still hinges on the global struggle to make the most of Trump's brief tariff relief.
China’s steel exports surpassed 10 million metric tons for the second straight month in April, as major customers including South Korea and Vietnam bought in bulk to avoid tariffs. Analysts expect the move to disrupt China’s lucrative transshipment trade.
With Trump's proposed tariffs, copper producers rushed to the US. Chinese imports of raw copper and derivatives remained stable.
Soybean imports fell to a 10-year low in April, amid lengthy delays in customs clearance. There were also delays in Brazilian shipments, caused by slow harvests and logistics problems.
Source: Joe Cash, Yukun Zhang and Sam Holmes | Notícias Agrícolas
