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China’s May exports slow, deflation deepens as tariffs bite
Underscoring the U.S. tariff impact on shipments, customs data showed that China’s exports to the U.S. plunged 34.5% year-on-year in May in value terms, the sharpest drop since February 2020, when the outbreak of the COVID-19 pandemic upended global trade.
Total exports from the Asian economic giant expanded 4.8% year-on-year in value terms last month, slowing from the 8.1% jump in April and missing the 5.0% growth expected in a Reuters poll, customs data showed on Monday, despite a lowering of U.S. tariffs on Chinese goods which had taken effect in early April.
“It’s likely that the May data continued to be weighed down by the peak tariff period,” said Lynn Song, chief economist for Greater China at ING.
Song said there was still front-loading of shipments due to the tariff risks, while acceleration of sales to regions other than the United States helped to underpin China’s exports.
Imports dropped 3.4% year-on-year, deepening from the 0.2% decline in April and worse than the 0.9% downturn expected in the Reuters poll.
Exports had surged 12.4% year-on-year and 8.1% in March and April, respectively, as factories rushed shipments to the U.S. and other overseas manufacturers to avoid Trump’s hefty levies on China and the rest of the world.
While exporters in China found some respite in May as Beijing and Washington agreed to suspend most of their levies for 90 days, tensions between the world’s two largest economies remain high and negotiations are underway over issues ranging from China’s rare earths controls to Taiwan.
Trade representatives from China and the U.S. are meeting in London on Monday to resume talks after a phone call between their top leaders on Thursday.
China’s imports from the U.S. also lost further ground, dropping 18.1% from a 13.8% slide in April.
Zichun Huang, economist at Capital Economics, expects the slowdown in exports growth to “partially reverse this month, as it reflects the drop in U.S. orders before the trade truce,” but cautions that shipments will be knocked again by year-end due to elevated tariff levels.
China’s exports of rare earths jumped sharply in May despite export restrictions on certain types of rare earth products causing plant closures across the global auto supply chain.
The latest figures do not distinguish between the 17 rare earth elements and related products, some of which are not subject to restrictions. A clearer picture of the impact of the curbs on exports will only be available when more detailed data is released on June 20.
China’s May trade surplus came in at $103.22 billion, up from the $96.18 billion the previous month.
Other data, also released on Monday, showed China’s imports of crude oil, coal, and iron ore dropped last month, underlining the fragility of domestic demand at a time of rising external headwinds.
Beijing in May rolled out a series of monetary stimulus measures, including cuts to benchmark lending rates and a 500 billion yuan low-cost loan program, aimed at cushioning the trade war’s blow to the economy.
China’s markets showed muted reaction to the data. The blue-chip CSI300 Index (.CSI300) opens new tab climbed 0.29% and the benchmark Shanghai Composite Index (.SSEC) opens new tab was up 0.43%.
DEFLATIONARY PRESSURES
Producer and consumer price data, released by the National Bureau of Statistics on the same day, showed that deflationary pressures worsened last month.
Other data, also released on Monday, showed China’s imports of crude oil, coal, and iron ore dropped last month, underlining the fragility of domestic demand at a time of rising external headwinds.
Beijing in May rolled out a series of monetary stimulus measures, including cuts to benchmark lending rates and a 500 billion yuan low-cost loan program, aimed at cushioning the trade war’s blow to the economy.
China’s markets showed muted reaction to the data. The blue-chip CSI300 Index (.CSI300) opens new tab climbed 0.29% and the benchmark Shanghai Composite Index (.SSEC) opens new tab was up 0.43%.
DEFLATIONARY PRESSURES
Producer and consumer price data, released by the National Bureau of Statistics on the same day, showed that deflationary pressures worsened last month.
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