China’s Exports to US Continue to Fall in July, Despite Tariff Reductions – Trade Diversion to Southeast Asia Observed
Beijing, August 8th – Chinese exports to the United States experienced a continued decline in July, falling 22% year-on-year, according to data released today by the General Administration of Customs. This marks the fourth consecutive month of decreasing shipments,despite a notable reduction in tariffs agreed upon in May. The ongoing impact of the US-China trade war is clearly visible in the figures, raising concerns about the effectiveness of recent de-escalation efforts.Context: The US-China Trade War & Its Evolution
The decline in exports is a direct result of the trade tensions initiated by the Trump administration in 2018,which saw the imposition of tariffs on hundreds of billions of dollars worth of Chinese goods. These tariffs were intended to address concerns over trade imbalances, intellectual property theft, and unfair trade practices. While a “Phase One” trade deal was signed in January 2020,many tariffs remained in place.
In April,the US had imposed tariffs totaling 145% on Chinese goods. Following ministerial consultations in Switzerland in May,tariffs were reduced by 115%,leaving a 30% tariff rate. However, the data suggests this reduction hasn’t fully translated into increased exports.
July’s 22% drop follows declines of 16% in June, 35% in may, and 21% in April. Exports to the US totaled $35.8 billion in July. Analysts point to a slowdown in the initial surge of demand as US businesses worked through existing inventories following the tariff reductions. “Although the inventory that has stopped shipments has been released, new orders have not been renewed,” explained Naoki Tsukioka, chief economist at Mizuho Research & Technologies.
Logistics Costs reflect Weakening Demand
The weakening demand is also reflected in falling shipping costs. The export container price index from Ningbo Zhoushan Port in Zhejiang Province to the US West Coast has plummeted nearly 70% as May 30th, coinciding with the tariff reductions.East Coast rates have fallen by almost 60%. This decline indicates a significant decrease in the volume of goods being shipped.Trade Diversion & Southeast Asian Growth
While exports to the US are down, China’s overall trade performance remains relatively strong, driven by increased demand from other regions. Exports to ASEAN (Association of Southeast Asian Nations), China’s largest export destination, rose by 17% year-on-year. The EU and Japan also saw increases of 9% each.
notably, exports to Vietnam and Thailand have experienced especially strong growth, increasing by 28% and 26% respectively. This suggests a potential trend of “roundabout exports,” where goods originally destined for the US are being shipped to Southeast Asian countries for final assembly or processing before being exported to the US, effectively circumventing tariffs.
New US Tariffs Threaten Further Disruption
The situation is further complicated by the declaration on August 7th by US President Trump of new reciprocal tariff rates on various countries and regions. This move is expected to increase export costs for Asian nations and could led to the US imposing tariffs on countries like Vietnam and Thailand if they are found to be facilitating the circumvention of tariffs on Chinese goods. Analysts believe this will inevitably impact China’s export landscape.
Additional Details & Future Outlook:
Data Source: The data originates from the General Administration of Customs of the People’s Republic of China.
Currency: All figures are calculated in US dollars.
Port Specifics: The shipping cost index is based on data from ningbo Zhoushan Port, one of the world’s busiest ports.
Geopolitical Implications: The ongoing trade tensions contribute to broader geopolitical uncertainty and could impact global economic growth.* Long-Term Strategy: China is actively pursuing strategies to diversify its export markets and reduce its reliance on the US, including initiatives like the Belt and Road Initiative.
This situation remains fluid, and further developments are expected as the US and China continue to navigate their complex trade relationship. The impact of the new tariffs announced by President Trump will be closely watched in the coming weeks and months.
Source: Nikkei shimbun (Chinese version: Nikkei Chinese website) – Kentaro Shimosaki, Beijing report.
Copyright: All rights reserved by Nihon Keizai Shimbun.
