(Bloomberg) -- China’s export growth unexpectedly rebounded in May and imports dropped, as the trade standoff with the U.S. intensifies and both countries show no signs of deescalating tensions.
- Exports rose 1.1% in May from a year earlier, while imports declined by 8.5%, the customs administration said Monday, leaving a surplus of $41.65 billion.
- Economists forecast that exports would decline by 3.9% while imports would drop by 3.5%.
Key Insights
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“For exports, it’s likely the extension of the U.S. tariff deadline and the front-loading of the remaining Chinese exports to the U.S. have contributed to the growth, but the year-to-date growth of exports isn’t very good,” said Xia Le, Hong Kong-based chief Asia economist at Banco Bilbao Vizcaya Argentaria SA. “Import growth slumped on slowing domestic economy and on the prospect of worsening trade tensions. As some of the Chinese imports are processing trade, they will cut purchases when the outlook for exports declines”
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While most trade in May likely didn’t have the new tariff rates applied, the looming increase may have encouraged some companies to ship earlier in the hope of getting their goods in before the deadline
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The U.S. Trade Representative also started reviewing imposing 25% tariffs on the remaining approximately $300 billion in imports from China.
- Chinese central bank governor Yi Gang said in an interview last week that there’s “tremendous” room to adjust monetary policy if the trade war deepens, and also signaled that he is not wedded to defending the nation’s currency at a particular level
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“We expect export growth to remain positive in June, likely supported by continued front-loading of China’s U.S.-bound exports,’’ said Lu Ting, chief China economist at Nomura Holdings Inc. in Hong Kong. “Since part of imports is imported components for assembly and re-exports, weak import growth now means smaller export growth in the near future,” said Lu, adding that exports will tumble in the third quarter when he thinks the threatened tariffs are likely to be imposed
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- China’s exports to the U.S. fell 3.2% in January-May from a year earlier in yuan terms, while imports dropped almost 26% over the same period, leaving a surplus of 750.6 billion yuan ($108 billion)
- Soy-bean imports dropped 12.2% in the same period
