China’s exports to the United States saw a sharp decline of 33% in August, as escalating U.S. measures against transshipments and the diminishing effects of earlier frontloading weighed down trade flows. Imports from Washington also posted a drop of 16% year-on-year, according to customs data.
Overall growth in Chinese exports slowed to 4.4% in August in U.S. dollar terms compared to a year prior, its weakest level in half a year and below market expectations for 5% growth.
This slowdown partially reflects a high base from last year, when Chinese exports posted their strongest gains in 18 months. On a seasonally adjusted basis, exports were largely flat from July to August.
In July, the U.S. introduced a 40% tariff on shipments identified as being rerouted through third countries to bypass trade restrictions. Economists noted that the fading impact of the U.S.-China trade truce, along with such tariffs, are set to put additional pressure on China’s export sector in the months ahead.
Meanwhile, imports increased 1.3% year-on-year in August, marking a third consecutive month of modest gains but still falling short of analyst forecasts of 3%. Persistent challenges in the property sector and job market continue to restrain import demand.
As U.S. trade actions continue to weigh on bilateral commerce, China has turned its focus to strengthening trade ties with Southeast Asia, the European Union, Africa, with August shipments to the group climbing by 22.5%, 10.4%, and around 26% respectively.
Analysts are closely monitoring whether Beijing will introduce new fiscal measures in the fourth quarter to boost domestic demand and offset weakening exports. While there has been speculation about increased stimulus, policymakers seem more focused on addressing industrial overcapacity than expanding popular consumer subsidy programs.
Looking forward, the People’s Bank of China is anticipated to potentially cut its policy rate by up to 20 basis points, as the country prepares to release economic data next week expected to show continued subdued growth. A rate cut could be used to bolster market sentiment, according to Evercore ISI.
