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Exports to China to China plummeted last month at the most since the start of the Covid-19 pandemic, highlighting Beijing’s interests as China and US negotiators are scheduled to meet in London for trade talks on Monday.
Exports to the US fell 34% year-on-year on the US dollar terms, according to Financial Times calculations based on official data. This is the largest decline since February 2020, and is steeper than the 21% decline in April.
Trade has become a key driver of growth for China, backed by a slower real estate. Overall exports increased 4.8% year-on-year.
The data highlights the impact of trade tensions on exports between the two largest economies in the world.
The London speech followed last week a call between President Donald Trump and Chinese President Xi Jinping. Both agreed to a 90-day ceasefire on May 12th. This remains fragile in the queue surrounding slow approvals for rare earth shipments.
Through restrictions on rare earth exports, which China has almost dominated, China demonstrated its negotiating power and drove Trump back to the negotiation table. But the latest trade figures show that US tariffs are at the expense of its taxes, analysts said.
Rin Song, ING’s chief China economist, said: “We expect export growth to the US could recover in the coming months.”
Individual data on Monday showed China’s consumer prices fell for the fourth consecutive month in May, with producer prices falling at the fastest pace in nearly two years.
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The consumer price index fell 0.1% per year in May, the National Bureau of Statistics said Monday. Producer prices, which reflect the cost of factory gate products, fell 3.3%, the fastest decline since July 2023.
Nomura economists said the deep deflation in factory prices was probably due to trade tensions, “as manufacturers engage in fierce price competition due to export orders.”
Trade tensions have been added to pressure from the slowdown in real estate that began in 2021. The longstanding low price growth and DEFL period have sparked concerns about consumer confidence and have been added in search of more stimulation from Beijing.
Last month, the People’s Bank of China announced a major lending rate cut as part of a steady easing that saw mortgage rates fall to support the housing sector.
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Zichun Huang, a Chinese economist in capital economics, showed us that trade data showed us tariffs that focused on overall exports.
“Early signs suggest that US demand for Chinese goods has recovered somewhat since the Geneva ceasefire. “However, tariffs seem unlikely to drop further, and there is still a risk that they can hike again.”
The ING song stated that “it’s difficult to imagine a significant rise” in the CPI, as “the domestic consumer sentiment remains soft and tariffs could cause further deflationary pressure.”
