China’s exports fall as shipments to US slump amid tariff war

BEIJING • China’s exports unexpectedly fell last month as shipments to the United States slowed sharply, pointing to further weakness in the world’s second-largest economy and underlining a pressing need for more stimulus as the US-China trade war escalates.

Beijing is expected to announce more support measures in the coming weeks to avert the risk of a sharper economic slowdown as the US ratchets up trade pressure, including the first cuts in some key lending rates in four years.

Last Friday, China’s central bank cut banks’ reserve requirements for a seventh time since early last year to free up more funds for lending, days after a Cabinet meeting signalled that more policy loosening may be imminent.

August exports fell 1 per cent from a year earlier, the biggest fall since June, when they fell 1.3 per cent, data showed yesterday.

That is despite analyst expectations that a falling yuan would offset some cost pressure and looming tariffs may have prompted some Chinese exporters to bring forward or “front-load” US-bound shipments into August, a trend seen earlier in the trade dispute.

Last month, China let the yuan slide past the key seven-per-dollar level for the first time since the global financial crisis, and the US labelled it a currency manipulator.

“Exports are still weak even in the face of substantial yuan depreciation, indicating that sluggish external demand is the most important factor affecting exports this year,” said economist Zhang Yi from Zhong Hai Sheng Rong Capital Management.

China’s August exports to the US fell 16 per cent year on year, slowing sharply from a decline of 6.5 per cent in July. Imports from America slumped 22.4 per cent.

Many analysts expect export growth to slow further in the coming months, as evidenced by worsening export orders in both official and private factory surveys.

More US tariff measures will take effect on Oct 1 and Dec 15.

“China-US trade friction has led to a sharp decline in China’s exports to the US,” said Mr Steven Zhang, chief economist and head of research at Morgan Stanley Huaxin Securities.

China’s exports to Europe, South Korea, Australia and South-east Asia also worsened on an annual basis, compared with July, while shipments to Japan and Taiwan posted slightly better growth than the previous month.

Sunday’s Customs data also showed China’s imports shrank for the fourth consecutive month since April. Imports were down 5.6 per cent in August, slightly less than an expected 6.0 per cent fall and unchanged from July’s 5.6 per cent decline.

Sluggish domestic demand was likely the main factor in the fall, along with softening global commodity prices. China’s domestic consumption and investment have stayed weak despite more than a year of growth-boosting measures.

China reported a trade surplus of US$34.84 billion (S$48 billion) last month, compared with a US$45.06 billion surplus in July.

Last month saw dramatic escalations in Beijing’s bitter year-long trade row with Washington, as the US announced 15 per cent tariffs on a wide range of Chinese goods from Sept 1. Beijing hit back with retaliatory levies, and let its currency fall sharply to offset some of the tariff pressure.

China and the US have agreed to hold high-level talks in early October in Washington, the first in-person discussions since a failed meeting on trade at the end of July.

But there was no indication that any planned tariffs on Chinese goods would be halted, and markets expect a lasting peace between the two countries to be more elusive than ever.

White House economic adviser Larry Kudlow said last Friday that the US wants “near-term” results from US-China trade talks in this month and next, but cautioned that the trade conflict could take years to resolve.

China’s trade surplus with the US stood at US$26.95 billion last month, narrowing from July’s US$27.97 billion.

It still reached US$195.45 billion in the first eight months of this year, highlighting continued imbalances which have been a core complaint of US President Donald Trump’s in his administration’s negotiations with Beijing.

“The global economy is approaching the turning point of a recession, and external demand will, for sure, become worse and worse,” Morgan Stanley Huaxin Securities’ Mr Zhang said.


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