China import/export drop as tariffs bite
China’s exports dropped further in September as imports fell for a fifth straight month, leading to further economic weakness and emphasising the need for further stimulus as the trade war between China and the United States persists.
The gloomy data is likely to strengthen Beijing’s belief that further measures will be implemented to avoid a more profound economic decline, in light of preliminary signs of a close trade relationship between the top economies in the world.
After discussions last week, US President Donald Trump outlined the first phase of a trade war settlement and suspended the threatened tariff increase set October. Nonetheless, current prices are still in force, and representatives from both sides have said that far more work is required before an agreement can be reached.
September saw another significant increase in the dispute, with Washington imposing 15 per cent tariffs on Chinese imports from September 1 for more than 125 billion USD, Beijing hit back with reprisals.
In September, customs figures showed a 3.2 per cent fall from a year ago, the most significant decline since February. Analysts expected a 3% fall in the Reuters poll after a 1% decline in August.
“The headline figures suggest that global demand softened last month, adding to the pressure from the US tariffs that went into effect in September,” Capital Economics analysts said.
Several economists attributed the weakening exports to a decline in the so-called “front-loading” Several Chinese firms had hurried before the September deadline to ship goods to the United States, helping export readings in July and August as a whole.
Total imports of September fell 8.5 per cent after a 5.6 per cent decrease in August, the lowest since May. Analysts had anticipated a 5.2 per cent drop.
While China’s domestic demand has remained stubbornly low following more than a year of growth-enhancing initiatives, economic uncertainty weights business and consumer trust and diminishes fresh investment.
The trade surplus recorded by China last month was $39.65 billion, as against August’s excess of $34.84 billion. Analysts predicted 33.3 billion US dollars.
In September, the trade surplus with the United States peaked at US$ 25.88 billion, lowered from August to US$ 26.96 billion.
In January-September, China’s exports to the US fell 10.7 per cent from one year ago by dollar, while US imports declined 26.4 per cent, customs data showed.
While President Trump vowed not to raise the tariffs on Tuesday, US representative Robert Lighthizer said that Trump had not settled on duty to come into effect in December.
Analysts believe Chinese economic growth slowed further in the third quarter, following a nearly thirty-year low of 6.2 per cent reached in April-June and risks breaching the government’s 6.0-6.5 per cent lower full-year target.
Several economists predict growth in the upper 5% range in 2020 due to a combination of cyclical and structural factors.