China's US trade surplus hit record in 2018 but tariffs bite

Ann Santiago
January 16, 2019

While the Chinese economy remained surprisingly resilient to these tariffs over the course of 2018, it appears the restrictions finally began to bite in December, driving United States exports down 3.5 percent and imports down a whopping 35.8 percent.

U.S. tariffs on Chinese goods have put additional strains on China's already cooling economy, prompting policymakers in Beijing to announce a series of growth-boosting measures to avert the risk of a sharper slowdown.

"We're doing very well with China", Trump told reporters at the White House.

"The export growth print also suggests that the recent strength of the yuan might be short-lived; Beijing will perhaps be more eager to strike a trade deal with the United States; and that policymakers will need to take more aggressive measures to stabilise GDP growth".

All being said and done, the economic data from China is being closely watched by economists all across the globe for signs of damage inflicted by the trade war between Washinton and Beijing.

Another reason for the trade deficit's jump past year is that USA firms may have hiked their imports of Chinese goods in reaction to Mr. Trump's threat to increase tariffs before he postponed them until March in a December decision. But penalties of up to 25 percent already imposed on billions of dollars of each other's goods remain in place, raising the cost for American and Chinese buyers of soybeans, medical equipment and other goods.

China's December exports unexpectedly fell 4.4 per cent from a year earlier, with demand in most of its major markets weakening.

China, the world's top soybean buyer, usually sources the bulk of its oilseed imports from the the final quarter of the year when the US harvest comes to market. Accordingly, the imports rose by 15.8 percent, the Chinese exports, but only to 9.9 percent.

Analysts, however, are predicting that this positive growth is unlikely to continue for much longer unless a rapid resolution between the world's two largest economies is reached.

"In 2019, the biggest worry for China's trade is due to complex and grim external environment", Li Kuiwen, spokesperson for General Administration of Customs, said during press conference.

A slowdown in global demand and a trade dispute with the United States are being blamed for the current predicament China finds itself in. Import growth also fell sharply in the face of cooling domestic demand.

Exports fell due to softening global growth and as the drag from USA tariffs intensified, while imports also fell due to cooling domestic demand, said Julian Evans-Pritchard, senior China economist at Capital Economics.

Some companies have shifted production of goods bound for the US from China to avoid USA tariffs. For all of 2018, soybeans, the second largest imports from the USA, fell for the first time since 2011.

Official data showed the manufacturing sector contracted in December for the first time in more than two years.

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