China economy

China records rare trade deficit … but surplus with US still looms large despite Donald Trump’s trade war threats

Chinese exports fall back unexpectedly in March but prospect of US tariffs fails to alter trade balance between world’s two largest economies

PUBLISHED : Friday, 13 April, 2018, 7:47pm
UPDATED : Friday, 13 April, 2018, 11:32pm

China’s March exports unexpectedly fell compared with a year earlier, leaving it with its first monthly trade deficit since February 2017, the country’s customs administration said on Friday.

But the world’s largest exporter continued to report a large trade surplus with the US last month, despite the looming threats of trade war from US President Donald Trump. 

In the first quarter of this year, the bilateral trade surplus rose by 19.4 per cent compared with a year earlier to US$58.25 billion, including US$15.3 billion in March alone.

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China’s overseas shipments in March dropped slightly in US dollar terms – falling by 2.7 per cent last month compared with a year earlier – the General Administration of Customs said, a sharp reversal from a surge of 44.5 per cent in February.

Chinese imports increased by 14.4 per cent, leaving China with a US$4.98 billion trade deficit for the month. For the first quarter, the world’s second largest economy still recorded a surplus.

Chinese exports to the US grew 14.8 per cent in the first quarter compared with the previous year but imports from the US rose 8.9 per cent year-on-year in the same period.

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China’s trade prospects remain uncertain as the threat of a fully fledged trade war with the US continues to loom large.

The US has announced plans to slap 25 per cent import tariffs on more than 1,300 Chinese products, with China responding with similar levies on more than 100 American products, including soybeans, pork and cars. 

The Trump administration is also threatening tariffs on another US$100 billion of Chinese products and is now working on restrictions against Chinese investment in the US.

Macquarie Securities economists Larry Hu and Irene Wu wrote in a note that the latest figures were “interesting” as they suggested both Chinese and global growth had peaked and China’s reliance on trade with the US had reached a new level. 

The US-China trade gap “hit a historical high” in the first quarter and was even higher than China’s total surplus of US$49bn during this period, they noted.

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Hu Yifan, chief investment officer at UBS’s wealth management unit, said a stronger yuan was now taking its toll on China’s exports.

Hu added that the impact from China-US trade tension had been limited for now because many measures have yet to be implemented. “The negative effect of trade disputes may not become obvious until the next half of year,” she said.

Huang Songping, a spokesman for China’s customs administration, told a briefing in Beijing that the US should not blame China for the surplus because it is a result of the economic structures in the two countries.

“If you take into account other factors such as … service trade, the real trade surplus between China and the US may not be as big as the numbers suggest,” Huang said.