Trade war escalation feared as China’s surplus with US grows
China’s trade surplus with the US widened to a record last month, risking further escalation of a bitter trade dispute with Washington. The difference between China’s exports and imports from the world’s largest economy expanded to a monthly high of $29bn (£22bn), up from $24.6bn in May. China’s exports to the US jumped by 13.6% in the first half from a year earlier, while its imports rose 11.8%.
Jonas Short, head of the Beijing office at the investment firm Everbright Sun Hung Kai, said the latest figures “won’t help already sour relations and escalating tensions”.
Earlier this week, President Donald Trump proposed a 10% tariff on $200bn of Chinese goods entering the US, saying those already in place on steel and aluminium imports and $34bn of goods had failed to force significant reforms by Beijing.
Trump’s advisers are attempting to open Chinese markets to foreign companies and reduce what they see as unfair subsidies that have given rise to a $340bn annual trade deficit.
Analysts said the June figures were a sign that exporters had rushed to beat the initial tranche of tariffs, which came into effect in the first week of this month. They said figures for July and August were likely to show a decline in exports to the US.
China’s commerce ministry confirmed last month Chinese exporters were frontloading exports to the US to get ahead of expected tariffs – a situation that could exacerbate any slowdown in shipments towards the end of the year.
“Export growth will cool in the coming months as US tariffs start to bite alongside a broader softening in global demand,” said Julian Evans-Pritchard, senior China economist at Capital Economics in Singapore.
Analysts also pointed out that Chinese export growth slowed to 11.3% year on year last month, from 12.2% in May, illustrating that exporters, faced with the threat of further trade barriers, were becoming more circumspect in sending goods abroad.
Washington has warned it may ultimately impose tariffs on more than $500bn worth of Chinese goods – nearly the total amount of US imports from China last year. So far China has responded in kind, adding tariffs to $34bn of goods from the US and threatening “firm and forceful measures” to match the threat of tariffs on $200bn worth of US exports.
The dispute has jolted global financial markets, raising worries that a full-scale trade war could derail the world economy. International Monetary Fund boss, Christine Lagarde, has warned of “darker clouds looming” for the global economy amid simmering trade tensions between the US and China, urging governments around the world to steer clear of protectionism or face negative consequences.
Markets largely shrugged off the figures, with the FTSE 100 finishing up 10.54 points at 7,661. Chinese stocks fell into bear market territory at the end of last month and the yuan has skidded, though there are signs China’s central bank is moving to slow the currency’s falls.
‘As tariffs bite, export growth will cool in coming months’ Julian Evans-Pritchard Capital Economics
▲ A worker sorting canned peaches for export at a factory in Xiayi in China’s central Henan province