China’s Exports Slow, Imports Plunge Amid Trade Tensions
Weakening Global Demand and Domestic Consumption Raise Concerns
Beijing reported a deceleration in export growth for May, alongside a sharper-than-anticipated decline in imports, signaling mounting economic headwinds for the world’s second-largest economy as trade disputes persist and domestic demand falters.
Export Growth Cools, US Trade Suffers
Overseas shipments increased by 4.8 percent year-on-year in May, a considerable slowdown from April’s 8.1 percent gain, and falling short of economists’ forecasts of a 6 percent rise. A significant factor was a 12.7 percent drop in exports destined for the United States, following the imposition of substantial tariffs by the Trump administration. Imports experienced an even more dramatic contraction, falling more steeply than predicted.
Imports from the US also plummeted, decreasing by 17.9 percent after China implemented retaliatory tariffs. Overall, exports experienced a one-third year-on-year decline in May.
Shifting Trade Patterns
While trade with the US waned, shipments to Vietnam saw an increase. However, exports to other Southeast Asian nations—Malaysia, Thailand, Singapore, and Indonesia—experienced slight declines after a surge in April.
“The trade war between China and the US led to sharply lower exports to the US, but the damage was offset by stronger exports to other countries.”
—Zhiwei Zhang, Resident and Chief Economist at Pinpoint Asset Management
Despite the shift, the overall trade outlook remains uncertain, complicated by the possibility of “frontloading”—where buyers accelerate shipments to preempt further tariff increases. According to the Peterson Institute for International Trade, US tariffs on Chinese goods still amount to $332.7 billion annually as of February 2024, demonstrating the lasting impact of the trade war. Source: Peterson Institute for International Trade
Domestic Spending Weakness
Adding to economic concerns, China’s consumer price index (CPI) – a key inflation indicator – decreased by 0.1 percent year-on-year in May. This marks the fourth consecutive month of falling prices, indicating a struggle to stimulate domestic consumption following the pandemic.
Zichun Huang, China Economist at Capital Economics, anticipates further slowing of export growth by year-end, citing tariffs that are “likely to remain elevated.”
The combination of weakening external demand and subdued domestic spending presents a challenging environment for China’s economic growth, raising questions about the effectiveness of current policy measures.
