Robust July foreign trade shows little impact from row with US

China’s foreign trade accelerated in July despite escalating trade tensions with the United States, with data pointing to a more balanced trade picture.

Growth in imports and exports, denominated in US dollars, rebounded in July, with imports rocketing by 27.3 percent — nearly double the growth pace in June — and exports rising 12.2 percent from a year earlier, data released yesterday by the General Administration of Customs showed.

July’s trade data was under the spotlight as it was the first reading since fresh US tariffs on a wide range of Chinese goods went into effect. The US slapped an extra 25 percent tariff on US$34 billion worth of Chinese imports beginning July 6, to which China responded with an equivalent retaliatory measure. 

China’s surplus with the US shrank slightly to US$28.09 billion in July from a record high of US$28.97 billion in June.

“China-US trade tariffs seem to have had more impact on China’s exports than its imports from the US,” said Betty Wang, senior China economist at the Australia and New Zealand Banking Group.

China’s exports to the US rose 11.2 percent year on year in July, compared with an increase of 12.5 percent in June, while China’s imports from the US grew by a faster 11.1 percent in July, up from June’s 9.6 percent.

At the same time, China’s imports from the Association of Southeast Asian Nations, the European Union and Australia jumped 30.2 percent, 20 percent and 33.7 percent, respectively, “which may suggest that China is trying to seek other import sources in the midst of the trade war,” according to the ANZ Group.

“Currency devaluation, which may have helped exports to some extent, has been largely market-driven in our view and is not a preferred policy tool by Chinese policy-makers as part of retaliatory measures,” Wang said.

Wang added that the much higher-than-expected import growth was mainly driven by surging commodity, mechanical and electrical products.

The better-than-expected growth might be partly because China tends to strengthen economic and trade ties with other major economies amid trade tensions with the US, Huatai Securities said in a research note.

Yesterday’s data also revealed a more balanced trade picture, thanks to the surge in imports. 

China’s global trade surplus narrowed by 40 percent from a year earlier to US$28 billion last month. The trade gap with the 28-nation EU contracted by 8 percent to US$11.2 billion.

China has been seeking a more balanced trade pattern, with a series of pro-import policies introduced.

Last month, the State Council released guidelines on expanding imports, promising tariff cuts, clean-ups of unreasonable price markups, and better intellectual property rights protection.

The policy incentives have had positive impacts on imports, Huatai Securities noted. It added that a decision of intensifying efforts to improve infrastructure, made at a meeting of the Political Bureau of the Communist Party of China Central Committee in late July, will further drive imports of industrial raw materials such as iron ore.

Looking forward, China tends to maintain strong imports, while exports are also likely to hold steady despite uncertainties rising from trade tensions with the US, said Bai Ming with the Ministry of Commerce research department.

“The tariffs have so far had a limited impact on overall trade,” China Merchants Securities said. While short-term effects might be mild, the impact of US tariffs on China’s trade may be gradually revealed as time passes and more tariffs on Chinese goods threatened by the US take effect, it noted.