Trade war: China’s surplus with US grows 10 per cent to US$31 billion as Donald Trump ups ante

Surplus that drove US president to wage trade war rises in China’s favour as he repeats threat of tariffs on further US$200 billion of goods

PUBLISHED : Saturday, 08 September, 2018, 2:34pm
UPDATED : Monday, 15 October, 2018, 12:02pm

China’s trade surplus with the United States widened by 10 per cent in August to US$31 billion, data showed on Saturday as the trade war between the two nations escalated with Donald Trump threatening duties on more Chinese imports.

Data from China’s General Administration of Customs showed that exports to the US in August jumped by 6.9 per cent from July to US$44.38 billion, but imports dropped by 0.9 per cent to US$13.3 billion.

China’s trade surplus therefore grew by more than 10 per cent to US$31.08 billion. The figure surpassed June’s surplus of US$28.97 billion and July’s US$28.08 billion.

For the period from January to August, the country’s trade surplus with the US was US$192.64 billion, compared with US$167.94 billion in the same period last year.

China says exporters front-loading shipments due to changes in trade environment

The increase in China’s trade surplus is mainly a result of US importers’ extra orders to avoid worse disruption later, said Nick Marro, a Hong Kong-based analyst with the Economist Intelligence Unit.

“Over the first seven months of the year, we’ve been seeing many people front-load their orders to avoid the tariffs,” said Marro.

“This will not look good to the US administration, which looks at the surplus as a very politically sensitive issue.”

The large surplus has long been a sore point in relations and is at the centre of the increasingly bitter dispute between the world’s two biggest economies.

The release of the data came after US President Trump said on Friday his administration intended to go ahead with tariffs on US$200 billion worth of Chinese imports.

Speaking to reporters aboard presidential jet Air Force One en route to a Republican Party fundraiser, Trump also breathed new life into threats he previously made to impose tariffs on the entirety of Chinese imports, which were worth over US$500 billion last year.

Donald Trump threatens to expand trade war to all Chinese imports as US moves ahead with further tariffs

“Now we’ve added another US$200 billion,” Trump said in remarks that were initially off the record but which he later told reporters they could publish.

“And I hate to say that, but behind that, there’s another US$267 billion ready to go on short notice if I want. That totally changes the equation.”

Trump did not indicate whether the office of the US trade representative (USTR) had reached a decision regarding the rate of the latest round of tariffs, originally proposed at 10 per cent.

US-China trade war: Beijing vows to hit back if Trump imposes new tariffs on US$200 billion of its goods

Trade Representative Robert Lighthizer announced on August 1 that he was considering raising the rate to 25 per cent, at the direct request of the president.

A Chinese delegation led by vice-minister of commerce Wang Shouwen visited Washington in late August at the invitation of the US Treasury’s undersecretary for international affairs, David Malpass, but there was no breakthrough in the stand-off.

China’s commerce ministry vowed to retaliate if the US took new trade measures against it.

While the August trade figures could further provoke Washington, its commitment to tariffs makes their introduction difficult to avoid regardless, said Marro.

“The US could use this as more of a justification,” he said. “The tariffs seem like an inevitability.”

The widening surplus is also a result of the recovering US economy, said Shen Jianguang, chief economist for Mizuho Securities Asia in Hong Kong.

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“The US’ trade deficits with the rest of the world have been widening,” he said. “Demand for imports in the US has climbed after tax cutsTrump signed in December, and not many companies have moved factories back [to the US from abroad].”

Although the US’ punitive tariffs had yet to show an effect in August’s trade figures, China is expected to encounter real challenges in September or October, Shen added.

“Once tariffs on the additional US$200 billion of goods take effect, China’s exports will face severe challenges,” he said. “What we are seeing in the numbers are still abnormal moves by companies who have tried to avoid further losses in the future.”